Investigation into compliance with obligations under the gas and electricity supply licences (Standard Licence Condition 27.2A) - Notice of decision

Mar 2011
Decision Proposed:
May 2014
Jul 2014
Scottish Power
Regulation Area:
Sectoral Regulations
Breach Area:
Tariff/payment rules

Sectoral case

The Authority has confirmed the financial penalty on Scottish Power following the investigation into Scottish Power’s compliance with Standard Licence Conditions 27.2A of its electricity and gas supply licence with respect to cost reflective price differentials.

By way of background, following the Energy Supply Probe, Ofgem introduced SLC 27.2A into the standard conditions of the gas and electricity supply licenses in January 2009. SLC 27.2A requires that any differences in terms and conditions between payment methods for paying charges for the supply of gas/electricity shall reflect the costs to the supplier of the different payment methods. If a licensee intends to set different terms and conditions for different payment methods, the licensee must have a robust process in place which ensures that those differences are complaint with SLC 27.2A. Notably, the licensee must have a sufficiently robust view of the relative costs of the different payment methods.

The Authority has found that Scottish Power failed to take sufficient steps at the time that it set the prices to ensure that the differentials between standard credit and direct debit prices and discounts were compliant with SLC 27.2A over the period 1 September 2009 to 2 December 2012.

The Authority considered it appropriate to impose a penalty on Scottish Power. However, Scottish Power agreed to pay £750,000 in payments to Energy Best Deal. The Authority considered that the payments offered by Scottish to aid consumers will be of greater benefit to energy customers than if a substantial penalty was imposed. Accordingly, the Authority decided that a nominal penalty of £1 should be imposed.