ScottishPower investigated over 'misleading' marketing campaign

The energy watchdog Ofgem is to investigate a "potentially misleading" ScottishPower promotion that promised customers savings of £459 a year.

The company's "Direct October 2012" package guaranteed prices at least 1 per cent lower than its standard direct debit deals until the end of September for people switching from rival energy suppliers. It was launched alongside price increases of 19 per cent for ScottishPower gas and 10 per cent for electricity earlier this month.

Ofgem stressed yesterday that the launch of an investigation did not mean the company had definitely breached its responsibilities. But Alistair Buchanan, the regulator's chief executive, called the inquiry "a further strong signal" to the industry that Ofgem wanted a "sea change" in the way customers were treated.

"Companies that fail to play it straight with consumers need to understand that they risk facing enforcement action," he added.

ScottishPower pledged its full co-operation and insisted the figures in the promotion were "accurate". It said the tariff was a very limited offer that was now fully subscribed.

Ofgem also confirmed yesterday that it was pressing ahead with major reforms of the domestic energy market which are intended to boost competition in the light of sharply rising wholesale energy prices. Initial proposals have garnered widespread support from consumers and business groups, independent generators and the "Big Six" major suppliers that command 99 per cent of the market, Ofgem said.

The regulator, whose most recent analysis revealed a 30 per cent surge in wholesale costs since December, is set to table final proposals in 2012.

"Ofgem is pressing ahead with its consultations to sweep away complex tariffs in order to expose energy suppliers' prices to consumer power," Mr Buchanan said. "We will also pursue breaking up the stranglehold of the Big Six on the electricity market to encourage more firms, like the new arrival, the Co-op, to enter the energy market."

Yesterday's developments were endorsed by the Liberal Democrat Energy Secretary, Chris Huhne. "With households and businesses facing rising energy prices, I want to see more clarity in billing to help consumers shop around," he said.

Consumer groups also welcomed the proposals but warned of the extent of the challenge.

"Ofgem has a major job on its hands," said Mike O'Connor, chief executive of Consumer Focus. "Suppliers may be coming round to the need for reform but they still seem to be in denial about the scale of change needed.

"That's why Ofgem has to take the suppliers back to school to relearn the ABCs of treating consumers fairly."