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Exposed: The energy firms forced to pay £8m over switching failures

Paloma Kubiak
Written By:
Paloma Kubiak

Three energy suppliers have paid out millions of pounds to more than 114,000 customers as they “dragged their heels” – some by a year – when it came to compensation payments for switchers.

E.On Next, Good Energy and Octopus Energy were found to have delayed or failed to make compensation payments owed to customers as part of industry rules when it comes to switching to a new supplier.

Energy regulator Ofgem confirmed that as part of its rules introduced in May 2020, if a final bill is not produced within six weeks of a customer switching supplier, affected customers are entitled to a one-off compensation payment of £30.

However, if compensation isn’t paid out within a further 10 working days, customers are entitled to another £30 under Ofgem’s ‘Guaranteed Standards of Performance’ (GSOP) regulations.

These three suppliers missed compensation payments to the tune of £6.3m, affecting more than 100,000 customers. In some cases, switchers waited over a year to receive compensation.

E.On Next was the worst, paying a total of £5.5m to almost 95,000 billpayers.

Octopus Energy paid out £750,000 to 19,000 customers, while 350 Good Energy customers received £18,000.

The energy firms paid out an extra £1.7m to customers (£1.3m from E.On Next alone) or the industry redress scheme which helps vulnerable households and funds local energy saving projects.

Delays could lead to bill shock

Ofgem said the problems occurred because the suppliers’ billing processes and systems “were not set up to deliver the GSOP payments in line with the timeframes set out in the regulations”.

As part of the GSOP compensation rules, it applies when an energy supplier switch is delayed or a customer is erroneously switched, or final bills are produced too late, “all things which can cause customers unnecessary stress and potential financial harm”, Ofgem said.

Before the rules were introduced, customers could be incorrectly set up at a new supplier if a final bill was not sent in a timely manner. It could also mean they were in debt to the old supplier so could receive a large, unexpected bill.

GSOP was introduced to “quickly fix the most harmful switching-related problems”, Ofgem said.

It added these standards “will be increasingly important this year” with switching activity predicted to increase again as the energy market recovers and customers begin to shop around for cheaper tariffs.

‘Ensuring customers get the service they deserve’

Neil Kenward, director for strategy at Ofgem, said: “Ofgem introduced these standards to make sure customers get the service they deserve when switching energy supplier.

“Our rules mean that where energy companies drag their heels, customers are automatically compensated. We won’t hesitate to hold energy companies to account, as we have done today.

“As the energy market starts to recover, we’ll likely see a return to more switching, and this action is a reminder to suppliers that they need to make switching as easy and convenient as possible for their customers, and where they cause undue delay, pay compensation swiftly.”

It confirmed all three suppliers have updated their billing processes and systems to ensure payments will be made in line with regulations. Affected customers don’t need to do anything to claim their refund as payments have already been made.

An E.On spokesperson, said: “Last year, we told Ofgem that our own internal checks uncovered that we had not added a Guaranteed Standards Of Service (GSOS) compensation payment for final bills which were sent out to some of our customers after the stipulated six-week timeframe. At the time, we contacted affected customers to apologise and sent them their missing payments. We also paid £1.3 million to Ofgem’s Energy Industry Voluntary Redress Scheme Fund in recognition of our failings. We have since taken steps to ensure this error does not happen again.”

Octopus Energy declined to comment while no response had been received from Good Energy by the time of publication.