Scottish Power Energy Retail Ltd will pay £1.5million in refunds and compensation, Ofgem has announced.
The energy retailer charged customers above the price cap during the peak of the energy crisis meaning thousands of customers could be due a refund.
Scottish Power confirmed that between 2015 and 2023, it mistakenly overcharged 1,699 direct debit customers a higher rate, which should only apply to those who pay by standard credit (on receipt of bill).
Ofgem agreed the redress package to compensate the thousands of customers who overpaid.
The energy company has paid a total of £250,000 in direct refunds to affected customers, plus another £250,000 in goodwill payments – equating to an average of £294 per customer.
All payments were made automatically, and customers do not need to do anything.
On average, each customer affected could have been overcharged almost £150 by the energy giant
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They also agreed to pay £1million to Ofgem’s Energy Industry Voluntary Redress Fund, which benefits charities and community projects that help vulnerable customers with energy-related support.
Dan Norton, Ofgem’s deputy director for price protection, said: “The last few years have been challenging enough for energy customers facing increasing cost of living pressures, without the additional hardship of being overcharged.
“The price cap is there to protect consumers, and we take seriously any breaches of the safeguards we have put in place.
“Suppliers must be vigilant and act quickly to resolve billing errors that impact customers.
“We will continue to closely monitors all suppliers and will hold them to account if they do not meet the standards we set.”
After discovering the operational errors las summer, Scottish Power reported itself to the energy regulator.
They discovered that these operational errors had led to direct debit customers being charged the standard credit tariff.
The overcharging period began in 2015 and continued across 11 price cap periods to June 2023 – a period when energy prices reached historically high levels, prompting the government to step in and provide additional support.
As this was during the peak of the cost of living crisis, Ofgem had to consider the extra strain and financial pressures this could have caused customers.
While the error is a serious matter, the regulator has taken into account that Scottish Power self-reported the issue and put in place steps to address the failings.
If they did not self-report and resolve the issues in a timely manner, the redress package sought would have been considerably higher, Ofgem stated.
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Ofgem’s Energy Redress Fund is operated on its behalf by the Energy Saving Trust.
The Energy Saving Trust deliver money collected from companies in breach of licence conditions to appropriate charities, trusts, organisations, or consumers.
Last year energy companies paid more than £72million in customer refunds, compensation and Energy Redress Fund contributions as a result of Ofgem’s compliance and enforcement activity.
