Ofgem orders ScottishPower to pay price gap penalty

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ScottishPower has been ordered to pay a £750,000 penalty by industry regulator Ofgem following an investigation into the difference in price paid by customers depending on their payment method.

Under Ofgem rules, energy suppliers are allowed to charge customers different prices if they use a different payment method, such as Direct Debit or by cheque. However, this cost should ultimately reflect the costs involved in collecting the payments from the customer.

The majority of suppliers offer customers paying by Direct Debit a discount because collecting the payment incurs less costs for them.

Ofgem found that ScottishPower didn't have a robust system to assess price difference by payment type. It revealed that the supplier was charging its customers £180 more each year if they didn't pay their bill by a Direct Debit payment. The problem occurred during a period between September 2009 to December 2012.

In December 2012, ScottishPower was made aware of the problem and acted by reducing the price differential from £180 to £97. This price has since been lowered again, down to £95.

The penalty will go towards the Energy Best Deal, a campaign designed to encourage consumers to shop around for the best energy tariffs.

Senior partner in charge of enforcement at Ofgem, Sarah Harrison, commented on the penalty.

She stated: "Suppliers need to clearly justify the different prices they set for different payment methods. In this instance, ScottishPower did not have a robust process in place when setting their prices to ensure that the difference between their tariff complied with Ofgem's rules. We held them to account for this and they will now pay £750,000 to benefit Energy Best Deal."

A spokesperson for ScottishPower said: "We recognise that historically we did not have a robust process in place but we are pleased that Ofgem has concluded its investigation and made no finding that any specific impact on customers resulted from our failure to have these processes in place.

"We fixed this problem by December 2012 and all of these processes are now fully compliant," they added.

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