Scottish Power has agreed to pay £750,000 following an Ofgem investigation into price differences between its standard credit and direct debit tariffs
The investigation found that between September 2009 and December 2012 Scottish Power did not have a robust process to assess the cost of different payment types and set prices accordingly.
Under Ofgem rules, suppliers can only have different prices for different payment methods if the amount reflects the costs involved in supplying those accounts.
These rules are designed to protect consumers and take into account that some payment methods are more expensive to administer than others.
Scottish Power will pay the £750,000 to the Energy Best Deal campaign run by Citizens Advice which helps consumers with their energy accounts.
Ofgem said the size of the penalty reflected the scale of the breach and took into account Scottish Power's willingness to accept its failings and make payments that benefited consumers.
Ofgem senior partner in charge of enforcement, Sarah Harrison, said: "Suppliers need to clearly justify the different prices they set for different payment methods.
"In this instance, Scottish Power did not have a robust process in place when setting their prices to ensure that the difference between their tariffs complied with Ofgem's rules.
"We've held them to account for this and they will now pay £750,000 to benefit Energy Best Deal."
A Scottish Power spokesman said: "Scottish Power has co-operated fully with this investigation.
"We recognise that historically we did not have a robust process in place but we are pleased that Ofgem has concluded its investigation and made no finding that any specific impact on customers resulted from our failure to have these processes in place.
"We fixed this problem by December 2012 and all of these processes are now fully compliant."