Energy supplier E.ON is to reduce its standard gas price by an average of 3.5 per cent with immediate effect.
The company, which has 4.5 million household customers, said the move is equivalent to £24 off the average annual gas bill, or two weeks' gas use.
E.ON also launched what it said was the country's cheapest energy tariff, a new one-year fixed dual-fuel product with an average annual price of £923.
The move increases the pressure on the other Big Six energy suppliers - British Gas, SSE, Scottish Power, EDF and npower.
E.ON UK chief executive Tony Cocker said: "Given the possibility of a price freeze, we are undoubtedly taking a risk today but we always put our customers first."
My research today shows that the scandal within a scandal here is that the regulator could not order Eon to pay a penny back to customers. The law would not allow it. The only way the £12 million "penalty" was reached was through agreement with E.ON itself.
The law has only just been changed to allow Ofgem to force energy firms to payback - and they are not allowed to use it in cases (like this) where the misdeeds go back years.
Ofgem has defended its decision to order energy firm E.ON to pay £12 million to customers, despite the company making an £8 billion turnover.
Sarah Harrison, the regulator's senior partner in charge of enforcement told ITV News that compensation was not the only issue at hand, but making the energy market "simpler, clearer and fairer for customers" was also an important factor.
E.ON has said it will compensate customers it may have mis-sold to. Find out how to make a claim.Read the full story ›
Investigations in 2011 showed that energy suppliers were not giving customers the best deal, a consumer watchdog has said, after E.ON was ordered to pay £12 million to vulnerable customers. Which? executive director said it was "extraordinary" it had continued for so long:
While this fine sends a clear warning message that mis-selling won't be tolerated, it's too late for customers who were mis-sold and the damage to consumer confidence in the energy industry has already been done.
Energy suppliers should not wait for the outcome of the proposed competition review and must seize their last chance to sort out woeful service standards and put customers first. ?Hard-pressed consumers ?need to be confident that the price they pay is fair.
Britain's energy market is broken, the shadow energy and climate change minister has said, after regulator Ofgem found that energy supplier E.ON has mis-sold to customers. Jonathan Reynolds said in a statement:
E.ON is just the latest in a long line of energy companies to be found guilty of misleading the public. The energy giants must know that if they mistreat customers already facing a cost-of-living crisis there will be a very heavy price to pay.
Our plans will break up the big energy companies, put an end to their secret deals and make tariffs simpler and fairer.
The Energy Secretary has welcomed a £12 million redress package, after regulator Ofgem found energy firm EO.N had broken sales rules.
Ed Davey said: "It's right that if energy companies aren't fair to their customers, then they're penalised - and their customers benefit.
"That's why we introduced legislation to ensure Ofgem can take tough action in these cases, including making the company pay compensation to the people affected."
E.ON's chief executive has admitted the energy supplier did not have "enough rules, checks and oversight" in place, after Ofgem ordered the firm to pay £12 million to customers over mis-selling.
Tony Cocker said as part of overhauling its sales operations the company has ended face-to-face sales and outbound residential cold calling.
He added: "It is completely unacceptable that we may have been unclear with customers about their tariff choices and as a result those customers may not have made the best choices for them [...] There was no organised attempt to mislead, and Ofgem has acknowledged this".
E.ON has agreed to pay £12 million to vulnerable customers after an Ofgem investigation found that the energy supplier had failed to properly train its staff in providing correct information to customers, which could have misled customers. As part of this package E.ON said they will:
- Pay around £35 to 333,000 of their customers who are normally recipients of the Warm Home Discount. This redress package is thought to benefit pensioners, disabled and low income families.
- Additionally, E.ON has agreed to make automatic payments to some vulnerable customers who may have been affected by E.ON’s poor sales practices.
- The supplier will write to around 465,000 customers it has identified through its redress work, informing them of how to get in touch to find out whether they were mis-sold to.