190,000 Scottish Power customers will each be paid a share of £8.5 million, after Ofgem found the energy giant guilty of mis-selling.
Separately, Ofgem has also announced tougher rules to protect customers who have fixed energy tariffs (join our free Cheap Energy Club to cut costs).
See our Q&A below for full information on both of these issues.
What did Scottish Power do?
Between October 2009 and January 2012, Ofgem found Scottish Power's doorstep and telesales agents gave people inaccurate comparisons with their current supplier, as well as wrong estimates of annual charges.
It ruled Scottish Power failed to adequately monitor or train its sales staff.
But Ofgem says there was no evidence Scottish Power deliberately set out to dupe customers. So while the firm will pay £8.5 million in compensation, it will not be fined.
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I'm a Scottish Power customer. How do I know if I'm affected?
If you signed up to receive gas or electricity, or both, from a Scottish Power doorstep or telesales agent between October 2009 and January 2012, you may have been given incorrect information and could be due a payout.
Scottish Power is sending letters to 336,000 households who it believes may have been mis-sold to. Some of these customers may have since switched supplier.
Of the households affected by mis-selling, Scottish Power believes around 50,000 could have lost out financially and could be due compensation.
How much can I expect to get?
£1 million of the £8.5 million is set aside for customers who Scottish Power mis-sold to.
These customers will be paid between £5 to £30 per fuel in compensation. This will be the difference in costs between how much you paid when you signed up to Scottish Power, compared with the price you would have paid if you stayed with your previous supplier, if Scottish Power costs more.
Scottish Power doesn't anticipate the total mis-selling compensation to exceed the £1 million put aside. Any money left over from the £1 million will go to its Energy People Trust charity.
The remaining £7.5 million will be paid to over 140,000 vulnerable customers, who received payments last winter as part of the Government's Warm Home Discount Scheme. These customers will automatically receive payments of approximately £50 each by December.
Do I need to do anything?
Scottish Power says it will begin sending out letters this week. Once you've got a letter, either contact Scottish Power on 0800 074 0362 or fill in its online form.
If you didn't receive a letter and think you may have been mis-sold to, you can ask Scottish Power to review your case by calling it or using the same form.
What about other firms?
Ofgem's investigation is part of a wider inquiry into mis-selling. Scottish and Southern Energy was fined £10.5 million in April for "prolonged and extensive" failures. Npower and E.on are still under investigation.
Archna Luthra, MSE's energy analyst, says: "These were appalling tactics used by Scottish Power and quite rightly, it's been slammed by the regulator. If you believe you're out of pocket due to its chicanery, I'd urge you to claim compensation.
"Don't fall for any suppliers' sales tricks. The best way to check if a deal is worth it for you is to do a full market comparison, which looks at all providers, and factors in your usage and postcode. Though right now, people should urgently consider locking in cheap prices with a fixed tariff to beat the price hikes."
Energy Secretary Ed Davey says: "This is a clear, strong signal that energy companies shouldn't expect to get away with bad practice.
"We're giving Ofgem powers that force energy companies to make direct payments to consumers hurt by these kinds of activities, and backing up Ofgem's reforms so that consumers get a simpler, fairer deal."
What does Scottish Power say?
Neil Clitheroe, Scottish Power's chief executive of energy retail and generation, says: "We accept Ofgem's findings and we apologise unreservedly to those customers affected. This arose as a result of new regulations which were introduced in 2009. I am sorry to say that we didn't implement these properly at that time.
"Since 2011 we have taken determined steps to resolve the problem. Doorstep selling was stopped and all telephone sales staff are properly trained and monitored. Independent verification of our current sales process suggests that we are now doing a better job."
What are Ofgem's new rules on fixed energy tariffs?
Today's new rules are aimed at making the energy marker clearer for customers. They are:
- Banning energy suppliers from increasing prices on fixed term deals, except in certain circumstances, for contracts entered into on or after 15 July 2013.
- Banning suppliers from rolling customers onto another fixed term tariff once their current one ends. Instead, providers will have to move customers onto their cheapest variable tariff from 31 March 2014.
- Customers will have to be given between 42 and 49 days' warning that their fixed deal is coming to an end. During this time, suppliers will be banned from charging a termination fee if the customer decides to switch.
MSE's Archna Luthra says: "Rolling people onto another fixed tariff they then have to pay to escape was a sharp practice, so it's good news that it's finally been outlawed by the regulator.
"People should not rest on their laurels though. Although suppliers will be obliged to move customers onto the cheapest variable tariff, it may still be beatable by a tariff from a different provider.
"They should quickly do a comparison, or even better, join our Cheap Energy Club, which will alert you when your tariff can be beaten."