Energy regulator Ofgem has announced new rules requiring providers to compensate customers who experience issues when changing supplier.
A minimum rate of £30 will be provided to customers in compensation for overly delayed switches, accidental supplier changes, incorrect billing, and similar problems.
According to Ofgem’s study, the primary reason that many consumers don’t switch – and therefore lose out on better rates – is fears over problems that occur during the move. The new regulations therefore are intended to lessen apprehension about switching and to allow customers greater flexibility and freedom of supplier choice. A study by the Competition and Markets Authority (CMA) found that households in total overpaid by £1.4 billion in the period 2012-2015 due to uncompetitive supply rates and a lack of switching.
When the regulator judges the supplier to have missed the minimum standards for switching efficiency, they would have to automatically compensate the consumer, either by transfer or by deduction from the bill. In some cases, both the gaining and the losing supplier may have to pay – so the consumer could receive up to £60.
Rob Salter-Church, Ofgem’s executive director of consumers and markets, said: “While the vast majority of switches go smoothly, too many problems are still occurring. These can cause inconvenience, and in some cases, real worry and stress for those affected. Today’s proposals for automatic compensation will strengthen protection for consumers who switch, and should serve as an incentive for suppliers to get switches right first time.”
Martin Lewis, founder of MoneySavingExpert.com, said: “The idea that you shouldn’t get a final bill very late after six weeks is absolutely spot-on. For too long, people have felt that they’ve left an energy provider and moved on elsewhere, but then, for up to a year later, can find themselves hit with bills of £100s for outstanding energy because the company has not got its act together. That isn’t good enough. It causes nightmarish budget problems and pushes some over the limit. Quite simply, after six weeks an energy company should give you your final bill, and at that point if it later decides it has got it wrong and you owe more money, it should not have a right to get it off you. They need to be more efficient, and if they’re not, it’s got to cost them.”
The new regulations should be in place by the end of 2018, and are part of Ofgem’s overall plan to encourage consumers to shop around and force competition for the Big Six suppliers. In February the regulator announced that suppliers must allow consumers to switch by the next working day by streamlining the process of changing, both for new and leaving customers. In addition, the supplier which the customer is switching away from must issue a closing bill within six weeks of the switch.
