The company must improve its customer service within three months, or the regulator will ban it from all proactive sales activities.
Ofgem has specified improvements for three key areas: call waiting times; late bills; and Ombudsman complaints.
Scottish Power must: answer all customer queries promptly; halve the number of overdue bills from 75,000 to 30,000 by the end of December; and resolve all outstanding Ombudsman complaints.
The regulator added it has also launched an investigation into the way Scottish Power treats its customers.
The news comes on the back of the supplier recording the highest percentage of billing errors among the large energy suppliers according to Uswitch.com.
Ofgem senior partner in charge of enforcement Sarah Harrison said: “Ofgem’s action today will drive immediate improvements for Scottish Power customers.
“The investigation we launched today is the third time we have used our new standards of conduct to make suppliers treat consumers fairly.
“This is a clear signal to suppliers to up their game and give consumers the service they are entitled to.”
She added: “In a properly functioning market we would expect companies to compete keenly on service. The need for our intervention here is yet more evidence that the energy market is not working for consumers.”
Scottish Power’s chief executive, Neil Clitheroe, apologised “unreservedly” to his company’s customers and provided “personal assurance that we will do what we can to correct every problem”
He added that Scottish Power has employed an additional 250 members of staff deal with the problems.
Ofgem had previously warned Npower in June to reduce its customer complaints or stop selling contracts on the phone until the problems were resolved.
In September, Npower met the first set of targets was allowed to continue with its telephone sales procedures.