ScottishPower to give £8.5million back to its customers after mis-selling scandal



Energy giant misled new customers about how much they would pay if they switched supplier

ScottishPower will write to 336,000 potentially affected households

£7.5million will automatically be paid to 140,000 customers by Christmas

Remaining £1million compensation available for those affected



Ofgem found mis-selling went on between October 2009 and January 2012

Energy firms to be hauled before MPs' committee to explain price rises



Energy giant ScottishPower will pay £8.5million compensation to customers after an investigation by the industry regulator found they had mis-sold gas and electricity.



Households were given misleading estimates of how much they would pay for energy if they switched their supplier, Ofgem found.

ScottishPower will now write to 336,000 households that may have been the victim of mis-selling - and up to 50,000 of those could be in line for payouts of up to £60.

Additionally, 140,000 of the company's most vulnerable customers will automatically receive £50 each in December, under the deal hammered out by the regulator.



Compensation: ScottishPower persuaded people to switch suppliers by providing misleading estimates of how much they would pay for their energy, an investigation found

Ofgem launched an investigation after claims that the energy giant, who supply power to 5.6million households across Britain, provided misleading information to customers on the doorstep and over the telephone when persuading them to switch.

Ofgem said that the mis-selling happened between October 2009 and January 2012.

In separate developments today, MPs said they would haul bosses from the Big Six firms before a committee of MPs to give evidence about recent price hikes.

SSE, British Gas and npower have all announced tariff rises in recent weeks.



ScottishPower today apologised 'unreservedly' to those affected and said it had taken steps to address its failures.

Under the deal agreed with regulators, the company has set up a £1million compensation fund for those affected - along with £7.5million for the most vulnerable.

The automatic £50 payouts will be given to those on the government-led warm home discount scheme.



Mis-selling: The company will write to 336,000 customers who could have been affected

ScottishPower said that, of the households affected by mis-selling, around 50,000 potentially lost out financially and could be due compensation.



It estimates compensation payments will vary from between £5 and £30 for each gas and electricity service provided to households.

Customers who think they were the victims of mis-selling will have to provide details of their previous supplier and Scottish Power will calculate whether they are eligible for compensation.

Ofgem said that, despite the sales practice failures, it found no evidence that the company deliberately set out to mis-sell to customers.

The group stopped doorstep selling in June 2011 and has overhauled training and monitoring procedures for all telesales staff.

Caroline Flint, Labour’s Shadow Energy and Climate Change Secretary, said: 'This is yet more evidence that Britain’s energy market is broken.

'Scottish Power is the third energy company to have been caught out misleading the public and two more are still under investigation.



'Yet again Ofgem’s response has been weak and David Cameron refuses to stand up to the energy giants.

'These companies need to know that if they mistreat their customers there will be a heavy price to pay.'



Energy and Climate Change Secretary Edward Davey said the compensation payout was evidence that energy companies were beind held to account.

He said: 'This is a clear, strong signal that energy companies shouldn't expect to get away with bad practice.



'We're giving Ofgem powers that force energy companies to make direct payments to consumers hurt by these kinds of activities, and backing up Ofgem's reforms so that consumers get a simpler, fairer deal.'



Neil Clitheroe, ScottishPower's chief executive of energy retail and generation, said: 'We accept Ofgem's findings and we apologise unreservedly to those customers affected.

'This arose as a result of new regulations which were introduced in 2009. I am sorry to say that we didn't implement these properly at that time.'

The probe into ScottishPower comes as part of a wider market inquiry into mis-selling across the energy industry, which has already seen three investigations concluded.

SSE was fined £10.5million in April for 'prolonged and extensive' sales practice failures.

Sales overhaul: ScottishPower apologised 'unreservedly' to those affected and said it had taken steps to address its failures

Ofgem is still conducting two ongoing mis-selling investigations into npower, which was launched in 2010, and into E.ON, which was launched last year.

Ofgem said it decided not to levy a fine against ScottishPower as the £8.5 million customer payment package agreed by the firm would be 'of greater benefit to energy customers than if a substantial penalty was imposed'.



It added that breaches of its rules on energy firm sales activities were vital to protect consumers.



Ofgem warned: 'Consumers can suffer financial detriment if they do not benefit from savings that they are led to expect - they may switch to a more expensive deal and competition suffers as consumers lose faith with the market and the value of switching energy supplier.'



Sarah Harrison, Ofgem's senior partner in charge of enforcement, said: 'Ofgem welcomes ScottishPower's recognition of its failure to comply with the energy sales rules which are there to protect the consumer.



'This is an important step forward and demonstrates a commitment by ScottishPower towards re-establishing consumer trust.'



Ofgem fined EDF Energy £4.5 million in March last year for misleading sales claims as part of the industry probe.