Huge change could speed up energy compensation for millions of households

07 September 2023 , 09:21

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Ofgem wants to make it quicker for households to receive compensation (Image: Getty Images/iStockphoto)

Energy regulator Ofgem is pushing for households to receive compensation earlier if they experience delays when switching gas and electricity suppliers.

Under the current rules, energy firms have to pay customers £30 if they're left waiting more than 15 working days to switch. Ofgem wants this reduced to five working days.

Ofgem has launched a consultation on the changes - and there is no guarantee it will definitely go ahead. In the consultation document, published online, Ofgem said: “We consider [our proposal] will continue to ensure appropriate compensation is paid to consumers for detriment suffered as a result of a delayed switch, whilst also being fair and reasonable to energy suppliers who will be liable to pay the compensation in the event that it is not met.”

It comes after Ofgem ordered three energy suppliers to pay out £8million after more than 100,000 customers experienced issues with compensation payments. E.On Next, Good Energy and Octopus Energy either missed or delayed payouts that were due.

E.On Next paid out £5.5million to almost 95,000 customers, while Octopus paid £750,000 to around 19,000 customers and almost 350 Good Energy customers received £18,000. The suppliers also paid a combined £1.7million to customers or the energy industry voluntary redress scheme, which supports vulnerable households.

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The problems occurred because the suppliers' billing processes and systems were not set up to deliver payments in line with Ofgem guidelines. This includes receiving £30 compensation if a final bill is not produced within six weeks.

Energy bills are set to fall for millions of households from next month when the new lower Ofgem price cap comes into effect. The price cap is falling from £2,074 to £1,923 from October 1 for the typical dual fuel household paying by direct debit.

But despite what its name suggests, the Ofgem price cap isn't actually a total cap on how much you can pay for energy. Instead, it puts a limit on how much you can be charged for unit rates and standing charges.

Levi Winchester