Energy regulator proposes to increase supplier compensation payments to £40

Ofgem plans inflation-driven increase to compensation payments for failure to meet minimum standards 

The energy watchdog has proposed a change in energy compensation rules that could mean customers get more cash if their supplier doesn’t perform in line with industry standards.

Under the new proposal, customers would get £40 in compensation if their supplier doesn’t meet regulator Ofgem’s Guaranteed Standards of Performance.

Since 2015, suppliers have been required to pay out £30. The uplift is to account for inflation, Ofgem said.

Alex Neill, co-founder of consumer rights group Consumer Voice, said: 

‘With the cost of living and energy prices still putting household budgets under pressure it is high time that compensation payments are increased. 

‘Unreasonable delays in switching suppliers or paying back credit balances all come at a cost to the consumer that is much greater than in 2015 when these rules came into effect.’

The consultation is the latest in a series of changes designed to improve standards for customers across the energy industry, following steep hikes in bills in recent years. 

Since April, energy suppliers must trigger quicker compensation payouts if they fail to meet a new 5-day switching rule.

Energy firm customer service standards

Ofgem’s minimum standards cover a range of services, including making and keeping appointments and the amount of time it takes to switch customers to a new supplier.

Beth Martin, director of consumer protection and competition at Ofgem, said: ‘We’re working hard to drive up standards in the energy sector, and have introduced a series of reforms to make sure energy companies are doing everything they can to support their customers.’

The new proposals would mean if your energy supplier doesn’t switch you to a new supplier within five days of your request, they would need to pay £40 rather than £30.

They also cover the time it takes to provide final bills and refunding credit balances of former customers.

If a supplier fails to meet any of these standards, it must automatically pay compensation to the person affected.

Moreover, if a supplier fails to provide the compensation within 10 working days, it must make another compensation payment.

Fines for companies not meeting standards

In 2023, Ofgem ordered E.On Next, Good Energy and Octopus Energy to pay £8 million in compensation for delaying or failing to make statutory compensation payments owed to energy customers.

In April, Scottish Power was ordered to pay £1.5 million in refunds and compensation to customers who were overcharged during the energy crisis.

Martin said: ‘The guaranteed standards of performance were brought in to make sure consumers get the service they deserve from their energy supplier, but we know things do go wrong from time to time. 

‘When that happens, consumers should be compensated fairly.’

‘With the cost of living increasing across the board, it’s right that we look again at the payment level to make sure this reflects inflation.’

Suppliers are also required to prioritise inquiries from vulnerable customers and offer proactive support to people who are struggling to pay their bills.

Energy customers also have rights to compensation of up to £2,000 in power cuts.