SCOTS energy firms are among 18 gas and electricity suppliers who have been told to pay £10.4 million in compensation for failures to one million homes over overcharging.

Ofgem said customers were collectively overcharged £7.2 million after their suppliers failed to follow price protection rules, which safeguard a customer’s tariff price when they decide to either switch suppliers or deals after a price increase.

It said several suppliers self-reported the issue to the regulator, which then prompted all firms to assess their practices, which revealed failures among 18 suppliers between 2013 and 2020.

The firms have agreed to refund all those affected and, in some cases, make additional good will payments to the tune of £10.4 million in total, Ofgem said.

Glasgow-based ScottishPower has been hit with a £1.97m compensation bill owed to 157,236 affected customers and issued an apology.

Perth-based SSE has to pay out £983,334 to 132,620 users, while British Gas - which trades as Scottish Gas in Scotland - has a £1.27m bill.

Hardest hit was OVO Energy which has a £2.8 million compensation bill.

Anna Rossington, interim director of retail at Ofgem, said: “Customers should have confidence in switching and not be overcharged when doing so.

“This case sends a strong message to all suppliers that Ofgem will intervene where customers are overcharged and ensure that no supplier benefits from non-compliance.

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“It also shows that, where appropriate, Ofgem is prepared to work with suppliers who have failed to comply with the rules, but who are willing to self-report issues and put things right for their customers.”

Ofgem said the suppliers  did not adhere to price protection rules, which protect a customer’s tariff price when they decide to either switch suppliers or tariffs after a price increase.

Customers affected include those on standard variable and fixed term deals who switched to different suppliers, as well as those on fixed term deals who switched to another deal with the same supplier.

The regulator said most of the failures were due to suppliers not having proper plans in place to make sure the protections were applied in full when customers decided to switch.

Richard Neudegg, head of regulation at price comparison site Uswitch.com, said: “While it’s good that these issues have finally been redressed, it is disappointing that the errors persisted for so long. 

“The regulator's action is vital to maintain confidence in the switching process, so that consumers will continue to access the significant savings available. 

“Ofgem has sent a clear message that it will strongly consider taking formal action if non-compliance is identified again in the future.”

In January, ScottishPower and Perth-based SSE both finished in the bottom three in an annual analysis of 25 suppliers for customer satisfaction.

ScottishPower finished second bottom of the rankings which cover bill accuracy and clarity, customers services, complaints handling and value for money.

ScottishPower was fined £18m by Ofgem in 2016. Billing chaos caused by a new IT system prompted the penalty from the energy services regulator which also admonished it for inadequate complaints handling and unfair treatment of customers.

The utilities giant, which has more than five million customers, was the most complained about energy supplier in 2019 with 8,441 cases referred to the Energy Ombudsman.Inaccurate bills and customer service issues were the most common complaints.

Only npower was lower ranked with a customer score of just 54 per cent, against ScottishPower's 55%.

SSE got a 66% score with Eon in the ratings conducted by Which? the consumer organisation.

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Both Scottish energy companies and npower were the only firms to gain just one star out of five for value for money.

In March, last year, ScottishPower faced an inquiry by the energy regulator in the walk of a dossier of complaints from angry customers.

Ofgem opened a "compliance case" and warned the company could be fined millions of pounds if it does not improve its services.

The watchdog said it had become 'increasingly concerned' about the supplier's "resolving of critical issues", adding: "We have seen slow complaint resolution times leading to customer dissatisfaction, and have been concerned with the lack of ability to identify, understand and resolve the root causes of known issues to prevent further similar complaints."

Ofgem also said it was "disappointed with the lack of progress made by Scottish Power" in reducing complaint resolution times and the volume of referrals made to consumer bodies.

A ScottishPower spokesman said of the Ofgem order: “We regret that some of our customers did not have their price protected during a switch or move as they should have done and we would like to apologise to any former or current customers of ScottishPower affected by this, all of whom have now been refunded.

“Our affected customers were overcharged by an average of £9.22 and we have now returned any overcharge to those customers and have also provided over half a million pounds of goodwill, the majority of which has been paid to Ofgem’s Voluntary Redress Fund which helps support energy consumers in vulnerable situations.

“It is clear that there have been some issues implementing this process across the industry, with just under half of energy suppliers failing to fully protect customers’ prices during a switch or move. We have worked hard to put further measures in place to avoid this happening again.”

A spokesman for OVO, which owns SSE Energy Services said: “We are very disappointed to have fallen short of our regulatory responsibilities. We have apologised and returned money to our members and worked with the regulator to identify and fix the historical issues. 

“Ofgem has recognised the steps we have taken to refund and contact all members due compensation as well as ensure that we are compliant going forward. We have also made an additional voluntary contribution to the redress fund to help support customers in vulnerable situations.”