- From 1 May consumers will receive at least £30 compensation for “erroneous switches” and delayed refund of credit balances.
- New requirements from Ofgem will boost consumer protection and confidence in the switching process.
- Compensation for delayed switches and late final bills will be introduced later this year.
Customers will automatically receive compensation from 1 May if they are not returned to the correct supplier when they are mistakenly switched or if suppliers are late in refunding the credit balances of customers who have switched away.
The new requirements will give customers peace of mind that they will be compensated if something goes wrong.
They should also serve as a wakeup call for suppliers to reduce the number of problems and boost confidence in switching.
Ofgem will separately introduce new requirements for suppliers to pay automatic compensation for delayed switches and providing late final bills later this year.
For switches initiated from 1 May, customers will automatically receive compensation for so-called “erroneous switches”, where they are mistakenly switched to another supplier.
Under the new rules, customers will be entitled to compensation up to a maximum of £120 if their supply is not restored to the correct supplier in a timely fashion. Both the gaining and losing and suppliers are subject to these new guaranteed standards.
Customers will also be entitled to a £30 payment if their previous supplier is late in refunding them their credit balance after they have switched.
Under Ofgem’s rules, suppliers must refund these credit balances within 10 working days of a final bill being issued.
Suppliers are required to pay compensation automatically to the affected customer within 10 days of the breach occurring. If they fail to make the initial payment, they will be required to make a further payment of £30.
Suppliers will have to report data on payments to Ofgem which will monitor their compliance to ensure that suppliers are implementing new regulations correctly.
While the vast majority of switches go smoothly, more problems are occurring as more people switch to get a better deal.
Rob Salter-Church, director, retail systems transformation at Ofgem, said: “When a switch goes wrong, it can cause inconvenience, and in some cases, real worry and stress for those affected.
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.”
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1. Ofgem had proposed introducing automatic compensation for relevant switching problems at the same time. However, following a consultation, Ofgem decided to introduce payments in stages and is reviewing the best way of structuring compensation payments for delayed switches and late final bills. This follows feedback that the original proposals did not set appropriate incentives because suppliers not at fault for these problems could still be liable for compensation.
2. The new Guaranteed Standards introduced from 1 May will apply in the following situations:
- When a customer reports a potential erroneous switch, the customer will receive a standard payment of £30 from each supplier if they are unable to agree within 20 working days whether an erroneous switch has occurred;
- The customer will receive £30 from the contacted supplier if they fail to return the 20 Working Day Letter as required by the Erroneous Transfer Customer Charter within 20 working days;
- An erroneously switched customer will receive £30 from their old supplier if they fail to re-register the customer within 21 working days; and
- Where a switch has been completed, customers will receive a payment of £30 if suppliers fail to return a credit balance within 10 working days of issue of a final bill.
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