Energy giant ScottishPower is to pay £8.5million to customers after an investigation by regulator Ofgem found that the group provided misleading information through its doorstep and telesales agents.
The watchdog said that, between October 2009 and January 2012, ScottishPower provided customers with inaccurate estimations of annual charges and comparisons with their current supplier if they switched to the firm and failed to adequately monitor its sales staff.
The company 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.
ScottishPower has set up a £1 million compensation fund for those affected, while the remaining £7.5 million will be paid to more than 140,000 vulnerable customers, who will automatically receive payments of around £50 each by December.
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.
“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,” Ofgem warned.
“Ofgem welcomes ScottishPower’s recognition of its failure to comply with the energy sales rules which are there to protect the consumer,” said Sarah Harrison, Ofgem’s senior partner in charge of enforcement.
“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.
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