British Gas will pay £1m in compensation after admitting to misleading customers by making exaggerated promises on its energy bill savings, industry regulator Ofgem has announced.
The UK's largest energy supplier mis-sold deals to customers at Sainsbury's supermarkets nationwide and at the Westfield shopping centre in London's Shepherd's Bush in a two year period from February 2011. This was in addition to incorrectly labelling the energy tariffs through the Sainsbury's brand.
According to the regulator, British Gas overestimated the savings that householders would make by switching to the advertised plans, while in some cases moving to the proposed tariff would have left customers financially worse off.
British Gas paid £566,000 in direct compensation to 4,300 affected customers, with the remaining amount going to the British Gas Energy Trust, a body that provides assistance to people struggling to pay their bills.
"Ofgem expects all suppliers to put this poor behaviour behind them and really start acting in a way that will help consumers trust energy suppliers. Where they don't, Ofgem will act," warned Sarah Harrison, the regulator's senior partner in charge of enforcement, alluding to previous mis-selling scandals involving the industry.
Ofgem said it has accepted the compensation package proposed by British Gas, which was modest compared to penalties handed out in other mis-selling cases. The regulator confirmed it would not launch a formal probe into the matter because of the company's swift response.