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Ofgem raises storm power-cut compensation cap to £2,000

Nick Cheek
Written By:
Nick Cheek

Compensation rates for households and businesses is to be nearly tripled from today if they lose power due to severe weather, the energy regulator has revealed.

Energy regulator Ofgem has announced that the limit on payments for loss of supply in the event of severe weather conditions such as a storm is to increase from £700 to £2,000. In addition, the initial payment when dealing with a bad weather situation is to rise from £70 to £80.

The length of time that consumers have to wait for additional compensation is to be reduced to six hours from 12 following the initial payment, which arrives in 24 hours for category 1 storms, and 48 hours for category 2 storms.

Regulations have also been updated to allow compensation payments to be made by bank transfer to simplify and speed up the  process.

The plan is also to remove the regulator’s category 3 stipulation, which will increase the number of compensation payments for inconvenience. This reduces the time consumers would need to be without power before they are eligible for payments.

As inflation has been high for a prolonged period of time, an inflation adjustment mechanism is to be introduced so that payments are in line with prices.

Storm Arwen review

Ofgem reviewed its compensatory framework following a review into its handling of Storm Arwen in November 2021, which brought severe winds of up to 90mph in parts of Northumberland. Overall one million homes lost power as the storm battered the UK.

The regulator examined the response to the storm by the distribution network operators (DNOs), who are responsible for linking up homes and businesses to the electricity network in the UK.

The upgrades to the statutory regulations were then decided upon with all six DNOs having to  follow the new guidelines.

Any network companies who fail to follow the rules and protect consumers’ interests could now face multi-million pound fines.

Lessons learnt after Storm Arwen

Akshay Kaul, the director general of infrastructure for Ofgem, said: “ It’s unacceptable that thousands of households were left without power in freezing conditions for a prolonged period during Storm Arwen, often with poor information about when their power would be restored.

“Many also found it hard to get the compensation they were entitled to afterwards, and that’s why we’ve put tough new rules in place to make sure network companies prepare better for severe weather; customers get accurate and honest information about power cuts in their area; and those who are off power in bad weather are rapidly and fairly compensated.”

He continued: “Lessons have been learnt by the industry following our review into Storm Arwen, but the frequency of extreme weather events is only set to increase, so we need to make sure network services are resilient.

“Network operators and suppliers should get ready for the coming winter. We will not hesitate to hold them to account if they fall short of the standards customers have a right to expect.”