Scottish Power reported itself last summer for mistakenly overcharging 1,699 direct debit customers at a higher rate, between 2015 and 2023.

When it discovered its operational errors had led to direct debit customers being charged the standard credit tariff, which should only apply to those who pay by standard credit (on receipt of the bill), Scottish Power reported itself to the regulator. The average amount overcharged during that period was £149 per customer.

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.”

£1.5m in refunds and compensation

Scottish Power Energy Retail Ltd will pay £1.5m in refunds and compensation broken up into the following payments:

• £250,000 in direct refunds to affected customers (the refunds were made automatically to the affected customers),
• another £250,000 in goodwill payments – equating to an average of £294 per customer,
• £1 million to Ofgem’s Energy Industry Voluntary Redress Fund, which benefits charities and community projects that help vulnerable customers with energy-related support. Ofgem’s Energy Redress Fund is operated on its behalf by the Energy Saving Trust who deliver money collected from companies in breach of licence conditions to appropriate charities, trusts, organisations, or consumers.

Overcharge across 11 price cap periods

This overcharge initially 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. In determining this redress package, Ofgem considered the additional strain and financial hardship that Scottish Power’s error may have caused customers during this time.

While the error is a serious matter, the regulator took into account that Scottish Power self-reported the issue and put in place steps to address the failings. Had Scottish Power not self-reported and resolved the issues promptly, the redress package sought would have been considerably higher.

Continue monitoring all suppliers

“Suppliers must be vigilant and act quickly to resolve billing errors that impact customers,” states Dan, “and we will continue to closely monitor all suppliers and will hold them to account if they do not meet the standards we set.”

Last year energy companies paid more than £72 million in customer refunds, compensation and Energy Redress Fund contributions as a result of Ofgem’s compliance and enforcement activity.