New compensation rules for supplier switching problems

From May 1st, customers can claim compensation for problems with switching energy supplier, as new Ofgem rules come into force.

Under the new rules, customers who are switched in error (erroneous switches) will receive up to £120 in compensation. This is only if suppliers don’t follow correctly the timescales for actions as outlined by Ofgem.

The rules are designed to boost consumer confidence in the switching process. According to the regulator, a total of 5.1million electricity customers and 4.1 million gas customers switched their supplier over the last year. That’s the highest number for a decade, and a trend Ofgem want to see continue.

Longer term, Ofgem want to enable switching provision by the next working day as well as elimination errors and delays. However, until that programme is in place, the automatic compensation rule is designed to provide extra consumer protection.

Ofgem director of retail systems transformation Rob Salter-Church told UtilityWeek ,

“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.”

Consumer watchdog, Which?, have done their own research into switching problems. They estimate that if the compensation rules were in place last year, customers would have been paid more than £70mfor problematic switches.

Customers will receive compensation if:

• They are switched erroneously to another supplier
• They have to wait too long to get their credit balance refunded

These rules will apply to all domestic customers undertaking switching activity after 1st May 2019. It does not apply to business customers or in the case where an energy supplier has gone out of business.

If a customer reports a potential erroneous switch and the suppliers involved cannot agree on the issue within 20 working days, the customer will receive £30 from each supplier, for a total of £60.

If the supplier fails to return the 20Working Day Letter, £30 is payable to the customer. And, if their original supplier fails to reregister them within 21 working days, a further £30 is payable.

This means a total of £120 can be claimed by any one customer in the event of an erroneous switch, if the correct procedures are not followed.

Separately, suppliers who have customers leave with credit balances could be liable to pay £30 if they do not make thee refund payment within 10 working days of the final bill being issued.

Payments are supposed to happen automatically, whether or not the supplier has signed up to the Energy Switch Guarantee. This is, of course, reliant on the supplier spotting the mistake. Customers do have the right to call up and request their compensation, however if the compensation has not been paid within 10working days, suppliers are obliged to pay an extra £30 to the customer.

Clearly, sticking to the rules in place is the best way to ensure your customer doesn’t get compensated. This means:

• You must advise a customer whether a switch is erroneous or valid within 20 working days of receiving the complaint. This applies to both suppliers involved in the switch.
• You must contact the customer within 20 working days to confirm the outcome of your investigation into an erroneous switch. This applies to either the supplier they were switched from or the one they are being switched to, whichever received the complaint.
• If the switch is agreed to be erroneous, suppliers must restore the connection within 21 working days of agreement being made. This applies to the original supplier.
• In the case of a credit refund, this must be made within 10 working days of sending a final bill.

 
Suppliers will be required to send data to Ofgem about the payments. The regulator will be monitoring compliance across the industry to ensure all suppliers are implementing these new regulations correctly.

Ofgem have said that these new rules “should serve as an incentive for suppliers to get switches right first time”.

In the near future, Ofgem are also planning to introduce new requirements for automatic compensation in regards to delays in switching supplier as well as when final bills are delivered late.

While the new rules may succeed in boosting consumer confidence in the switching process, for suppliers it’s yet another layer of paperwork and regulations to be aware of.

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