British Gas has been forced to pay out £1m to its customers after mis-selling energy deals to thousands of shoppers in Sainsburys stores nationwide and the Westfield shopping centre in Shepherd's Bush, London.
British Gas employees, who were selling gas and electricity tariffs directly to shoppers, overstated the savings that householders could make by switching to the plans. In some cases moving to the British Gas tariff would actually result in a bigger gas bill for the householder.
The sales were made through Sainsbury's Energy, a tie-up between the supermarket and British Gas, in stores and by British Gas directly at the Westfield shopping centre between February 2011 and March 2013.
British Gas has already paid £566,000 direct compensation to more than 4,300 affected customers and made an additional £434,000 towards its vulnerable customers via the British Gas Energy Trust.
Those affected should already have received a typical £130 payment into their bank accounts. This includes 1,300 people who could not be contacted by British Gas but who have had an automatic payment made to them.
British Gas also identified a further 1,300 potentially affected customers who are no longer with the company.
Payments to these people, totalling £161,00, has instead been paid into the British Gas Energy Trust. However, the energy giant said that affected former customers who come forward now will receive the compensation owed to them.
"We are very sorry and have ensured no customer will be out of pocket as a result," said Ian Peters, managing director of British Gas Residential. "We pride ourselves on our high standards and it is extremely disappointing when even a relatively small number of customers don't receive the service they expect from us."
British Gas became aware of the issue in April 2013 and reported it to regulator Ofgem. Ofgem said it has accepted the compensation package proposed by British Gas and it would not formally investigate because of its prompt action.
"Ofgem welcomes British Gas's action to tackle its sales failures and compensate customers quickly when it became aware of mis-selling," said Sarah Harrison, senior partner in charge of enforcement at Ofgem. "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."
On top of the £1m compensation, British Gas will pay a further £273,019 to its trust. This is because between February 2012 and March 2013 its employees failed to wear any form of British Gas branding on their uniforms and display stands when selling Sainsbury's Energy tariffs in the supermarket's stores. Suppliers are required to clearly identify themselves to customers as part of the energy sales process.
The mis-selling by the country's biggest energy supplier is the latest in a series of scandals to hit the sector.
At the end of June, Ofgem referred the much-criticised power industry to the Competition and Markets Authority (CMA), starting what will be the biggest investigation into the sector to date.
The big six suppliers will be under the spotlight for the next 18 months as the CMA looks at whether SSE, British Gas and others have been profiteering and should be broken up.
Earlier in June, npower was told to report to Ofgem every month on its progress in reducing late billing or risk having to scrap some of its telesales activities. The regulator has also opened a new investigation into npower's failures to deal properly with complaints raised six months ago.
Tom Lyon, energy expert at online price comparison site, uSwitch.com, said in reaction to the npower news that billing issues were one of consumers' biggest gripes, with one-fifth of households being billed incorrectly by the wider industry last year and companies taking longer than ever to resolve complaints.
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