Ofgem: New customer compensation payments to further improve switching

·       New compensation requirements from Ofgem will protect consumers and further boost confidence in the switching process

·       This follows switching compensation payments introduced last year, which have already delivered over £700,000 to customers

Customers will receive an automatic £30 payment from suppliers if they are switched by mistake, if their switch takes longer than 15 working days, or if their final bill doesn’t arrive within 6 weeks1.

The new requirements, which come in on 1 May, will give customers further peace of mind that they will be compensated if something goes wrong when they switch.

They should also serve as a wake-up call for suppliers to cut out problems for customers and get switching right first time.

From 1 May 2020, customers whose switch does not complete within 15 working days, or who are switched by a supplier by mistake, will receive the payment from the new supplier. The supplier the customer is switching away from must pay out if it fails to issue a final bill within six weeks of a switch.

Ofgem introduced the first batch of compensation payments last year2, meaning suppliers must 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 already received over £700,000 from suppliers. Of these payments, 27% have been for mistaken switches, while 73% have been for late credit balance refunds.

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”.

Minister for Energy and Clean Growth Kwasi Kwarteng 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.”

Notes

1 - In September 2019, Ofgem consulted on these new compensation payments (known as Guaranteed Standards), and published the final decision (Hyperlink when live) on 12 February 2020. The new standards will take effect from 01 May 2020.

2 - These new Guaranteed Standards are part of Ofgem’s programme of work to deliver faster and more reliable switching. In 2019 Ofgem introduced the first tranche of Guaranteed Standards, requiring suppliers to pay compensation if they fail to meet minimum standards regarding how promptly credit balances are refunded to customers, as well as forcing suppliers to pay compensation if they were too slow in identifying, rectifying, and notifying customers of “erroneous transfers” (when people are switched by mistake). Both the gaining supplier and the losing supplier must pay compensation if they fail to agree that an erroneous transfer has occurred (within 20 working days), if the contacted supplier fails to provide notification to this customer of this decision (within 20 working days), and to the customer’s original supplier if they fail to re-register the customer promptly (within 21 working days). This first tranche of Guaranteed Standards took effect on 1 May 2019.

The new Guaranteed Standards introduced in May this year in the second tranche will require the gaining supplier to make a compensation payment if a customer is erroneously switched to them. This Guaranteed Standard was held over from the previous tranche in order for us to identify which supplier was most likely to be responsible for an erroneous switch.