ScottishPower agrees to pay consumers £8.5m following Ofgem sales investigation

Press release
Publication date
Industry sector
Supply and Retail Market
  • Ofgem found ScottishPower breached its marketing licence conditions
  • ScottishPower will pay £7.5 million to benefit vulnerable customers and establish a £1 million customer compensation fund
  • ScottishPower’s actions today represent an important step by the company to re-establish consumer trust 

Ofgem’s investigation found that ScottishPower breached its marketing licence conditions, and the company has agreed to pay an £8.5 million package that will directly benefit vulnerable consumers and compensate consumers that were misled.

Ofgem’s investigation found that ScottishPower did not have in place appropriate management arrangements to adequately train and monitor their doorstep and telesales agents. This resulted in misleading information being provided to customers during sales approaches.

ScottishPower has accepted these failings, which have now all been rectified. ScottishPower stopped doorstep sales in 2011 and has put in place independent checks on the conduct of their telephone agents in all new sales. Had this not been the case the company would have faced a higher penalty.

The size of the payment reflects the impact of the sales practices on consumers and it also recognises ScottishPower’s cooperative engagement with Ofgem to put right their processes. Ofgem’s investigation found no evidence of a strategy by ScottishPower to deliberately mis-sell to customers.

Ofgem’s Senior Partner in charge of enforcement Sarah Harrison 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.

“Today’s announcement is a clear signal to energy suppliers of the consequences of breaching licence obligations and of the importance of taking action to put things right for consumers when they go wrong.

“Ofgem’s retail market reforms, backed by enforcement action, will create a simpler, clearer and fairer energy market for consumers. Now it is time for suppliers to put these changes into action and rebuild consumer trust.”

-Ends-

Notes to editors

1. Summary of licence breaches:

Ofgem’s investigation found that between October 2009 and January 2012, ScottishPower breached its marketing obligations due to the fact:

  • ScottishPower did not ensure through its management arrangements the provision of accurate estimates of the annual charges that customers would pay and comparisons with their current supplier if they switched to ScottishPower;
  • ScottishPower did not consistently calculate actual consumption or provide a ‘best estimate’ of customers’ annual consumption resulting in unreliable information being provided to customers;
  • ScottishPower did not adequately monitor the sales activities of external and in-house sales agents;
  • ScottishPower did not have in place appropriate management arrangements, and issues with controls and training resulted in misleading claims being made during face to face and telesales marketing activities.

Read the full document: Investigation into compliance with obligations under the gas and electricity supply licences (Standard Licence Condition 25)

2. Details of package

ScottishPower has set-up a £1 million customer compensation fund. Customers that believe they may have been mis-sold to can either complete an online form or call the dedicated phone number. Customers can call Scottish Power on 0800 0740 362

www.scottishpower.co.uk/salescompensation

ScottishPower will deliver the remaining £7.5 million through payments to customers identified under the Warm Home Discount Scheme. Payments will be made to recipients of the 2012/13 core and broader group. It is estimated that over 140,000 customers will receive a payment of around £50. ScottishPower will send an explanatory letter to all affected customers and the payments will be made automatically by ScottishPower by December 2013.

3. Ongoing investigations into energy sales

Ofgem has now concluded three mis-selling investigations. The two ongoing mis-selling investigations are into npower, which was launched in 2010, and into E.ON, which was launched last year.

4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

For further press information contact:

Lisa O’Brien 020 7901 7426
Chris Lock 020 7901 7225
Felicity Beverley 0207 901 3858
Rory Edwards 020 7901 7246

Out of hours media contact number 07766 511470