Energy networks should pay compensation automatically

“If an energy networks company fails to provide an essential service, customers should be compensated automatically”

For too long, energy customers have been let down on multiple fronts: the price people pay for their gas and electricity is often much too high and the customer service people receive from suppliers is too often inadequate.

As the government and regulator look to tackle the sky-high prices charged by energy suppliers through a cap on standard variable tariffs, the energy network companies that deliver gas and electricity to homes and businesses in Great Britain should not escape scrutiny.

This month we publish new research that finds more than 62,000 households received no prior notice before their gas supply was interrupted for planned works between April 2015 and March 2016 – and these customers missed out on at least £1.2 million in compensation that they were entitled to from the gas network companies.   

It is likely that energy consumers are owed even more compensation by electricity and gas network companies, but at the moment there is too little data to know just how much.

This situation shouldn’t continue. That’s why our research details how regulation should change to ensure more compensation money reaches consumers in the future.

Energy is essential to people’s lives

Our research finds that energy network companies overall do a good job providing the services required of them by their guaranteed standards. But service failures do happen.

We think that if customers don’t get an essential service, they shouldn’t have to also think about and claim compensation.

Regulation should be designed around people’s behaviour, and if a company is aware they have done something wrong – for example, not provided you with a service or product as agreed or required by law – they should pay you compensation automatically.

Our previous research into consumer detriment found that 55 per cent of people do not seek redress or compensation because they find the process too long or complicated, they don’t think they will succeed, or they’re not clear about how to make a complaint.

Automatic compensation makes taking action the responsibility of the company, as part of their customer service. It means customers do not have to go through a claims process. They don’t have to ring up the company involved, fill in forms or provide evidence. We think this is a fairer system.

Technology is moving fast and regulation has to keep up. Energy networks do face some barriers to providing customers with the right compensation. For example, they do not have a way to monitor the gas or electricity connections to individual homes and businesses – meaning they won’t know when they owe compensation for an interruption.

But technology is moving fast. The new generation of smart meters (Smets 2) will not only communicate with suppliers about how much energy is being used but will also be able to send electricity networks a “last gasp” outage notification when customers go off supply and back on again.  

Hurdles to automatic compensation are being overcome as technology develops, so regulation around compensation should move with the times.

Automatic compensation is the norm in the water industry. Like energy companies, water companies are set certain standards by Ofwat. They have to meet these – and if they can’t, they pay compensation to customers. Within ten days of breaching such a standard, water companies have to automatically pay the consumer a set amount.

Some companies go further, such as reducing the timescales over which they guarantee to pay out compensation, or paying a higher amount than the minimum amount set out in the water regulations.

In telecoms, communications regulator Ofcom is also currently considering introducing automatic compensation for landline and broadband customers.

Citizens Advice will be looking at how compensation processes could be simplified and where they could be automated in a wide range of markets. It’s the responsible thing to do. The technology is now making it possible. And we think automatic compensation must be part of  what customer service should look like for essential services in the 21st c entury.