Ofgem brings in automatic compensation for switching issues

Starting tomorrow (1 May), energy consumers will be automatically compensated up to £120 if they are mistakenly switched to another supplier and not promptly returned.

Under new rules being introduced by Ofgem, they will also be entitled to receive £30 from their old supplier if they fail to return their credit balance within ten working days of issuing of a final bill following a correct switch.

“When a switch goes wrong, it can cause inconvenience, and in some cases, real worry and stress for those affected,” Ofgem director of retail systems transformation Rob Salter-Church.

“Automatic compensation payments from 1 May, and additional payments this year, should serve as an incentive for suppliers to raise their game and get switches right first time.

“These new requirements, together with the introduction of the price cap, and tightening the rules on new suppliers entering the market, demonstrate our commitment to protecting consumers and ensuring they get a better deal.”

When a customer reports a potential “erroneous switch”, they will receive £30 from both the old and new supplier if they are unable to agree whether one has occurred within 20 working days.

They will also receive £30 from the contacted supplier if, during the same period, it fails to provide the customer with confirmation they will be returned to their old supplier or a statement on the outcome of their investigation if no error is found.

They will receive a further £30 from their old supplier if they fail to re-register the customer within 21 days of an erroneous switch being confirmed.

Suppliers will have ten working days to make compensation payments. In each instance they fail to do so, they will obliged pay an additional £30 to the affected customer.

The new standards were proposed by Ofgem in a consultation published in June. The regulator originally intended to introduce further requirements for suppliers to compensate customers if they fail to carry out a switch within 21 days and then issue a final bill within six weeks.

However, the regulator decided in November to delay the implementation of these measures until later in 2019.

Industry voices have welcomed the move and suggested it will help restore “confidence” in the switching process and the energy market as a whole after a “rocky” few months.

An Energy UK spokesperson said:“More and more customers are switching supplier every year to find the best deal and save money – with more than 600,000 doing so last month. Confidence is vital for encouraging switching – especially amongst those customers doing so for the first time – which is why we set up the energy switch guarantee in 2016, a voluntary industry initiative under which participating suppliers commit to ensuring that the process will be simple, speedy and safe.

“While only a relatively small number of switches go wrong, that’s still too many if you are the customers involved, so we support any moves that will give more customers the confidence to benefit from a very competitive marketplace with around 60 suppliers to choose from.”

Anders Nilsson, spokesperson for automatic switching service Weflip, added: “This announcement by Ofgem will not only provide financial compensation if something goes wrong, but will help to restore confidence in the switching process and the energy market as a whole, after a rocky few months of supplier failures and erroneous switches.

“The energy price cap has left many households with little alternative but to take matters into their own hands to save money, and while most switches go smoothly, it’s good to see that customers have been provided extra protection, and suppliers have an incentive to ensure more switches happen without a hitch.

“Ofgem’s longer-term plan to introduce further compensation for delayed switches and late final bills, along with the tightening of the rules on new suppliers entering the market, is all reassuring.”

Natalie Hitchins, Which? head of home products and services, said: “Switching is the ultimate way for consumers to avoid rip-off energy tariffs, yet the regulator has estimated energy customers would have been owed more than £70 million in just one year for switches gone wrong had automatic compensation been in place, and with switching on the rise this figure could be even higher.

“The regulator now needs to enforce its automatic compensation standards so that energy companies get it right first time and consumers are not put off switching – given they could potentially save more than £300 a year.”