Scottishpower To Pay £1.5m For Overcharging Customers

17th April 2024

ScottishPower Energy Retail Ltd will pay £1.5 million in refunds and compensation after it charged customers above the price cap during the height of the energy crisis.

Ofgem agreed the redress package after the supplier 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).

The average amount overcharged during this period was £149 per customer.

As a result, ScottishPower 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.

ScottishPower has also agreed to pay £1 million 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."

ScottishPower reported itself to the regulator last summer, when it discovered that operational errors had led to direct debit customers being charged the standard credit tariff.

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 ScottishPower’s error may have caused customers during this time.

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

Around 29 million households are protected by the price cap, which came into effect on 1 January 2019.

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. Information on the Energy Saving Trust can be found on their website.

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.