Energy customers to receive automatic compensation for delays in switching accounts

New requirement should be a ‘wake-up call’ for industry and instil consumers with confidence to change providers, says Ofgem

Gas and electricity companies will be forced to pay customers £30 for problems they encounter switching suppliers (PA)

Energy companies will be forced to automatically compensate customers who experience delays or mistakes when switching supplier.

Regulator Ofgem said its new compensation requirements would protect consumers and further boost confidence in the switching process.

Customers will receive an automatic £30 payment from gas and electricity suppliers if their swap takes longer than 15 working days, if their final bill does not arrive within six weeks, or they are switched by mistake.

The requirements coming into force from 1 May will give customers further peace of mind that they will be compensated if something goes wrong when they change providers, Ofgem said.

It added the move should serve as a wake-up call for suppliers to cut out problems for customers and get switching right first time.

A customer’s new supplier will be required to pay the compensation if the switch is delayed or happens by mistake. Their older supplier will pay if they did not issue a final bill in time.

Mary Starks, executive director for consumers and markets at Ofgem, said: “More customers are switching than ever, with a record 6.4 million changing supplier in 2019. But we also know that a minority can still experience problems when they switch.

“As part of our commitment to protecting consumers and enabling competition, we are introducing these new standards to give customers further peace of mind, and to challenge suppliers to get it right first time.

“Going forward, we will continue working with suppliers and consumer groups to deliver our programme for faster and more reliable switching and ensure these arrangements are fit for the future.”

Last year Ofgem introduced new rules requiring energy suppliers to pay out if they fail to meet minimum standards around spotting and correcting mistaken switches or refunding credit balances to customers.

Since then, customers have received more than £700,000 from suppliers. Of these payments, 27 per cent were for mistaken switches and 73 per cent were for late credit balance refunds.

Kwasi Kwarteng, the minister for energy and clean growth, said: “We’ve made it easier than ever for consumers to shop around and record numbers are now switching suppliers to save on their bills.

“These tough new standards will ensure switching is as smooth as possible and consumers are always protected.”

David Pilling, head of policy and public affairs at the Energy Ombudsman, added: “Switching is now second only to billing as a source of complaints that we handle, so it’s clear that for too many people the process of changing supplier doesn’t go as smoothly as it should.

“The introduction of automatic compensation is a welcome intervention by the regulator. It offers consumers access to immediate redress and gives suppliers a financial incentive to get switches right first time.

“At the same time we think it’s vital that, as well as paying compensation, energy suppliers look at what went wrong with the switch and make improvements to their processes. It’s in this root-cause analysis and proactive work to raise standards across the sector that we see our role as the ombudsman.”