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Overcharging Energy Firms Could Be Forced to Compensate Customers

By Katie Anderson on April 10, 2012

Under new proposals Ofgem could start to force energy firms to compensate customers in cases of overcharging. 

In what is being described as a “beefed up” industry watchdog, the energy regulator would have the power to make energy providers pay compensation to energy consumers where they have been found guilty of overcharging. Enhanced powers will also enable Ofgem to demand compensation for mishandling customer complaints and mis-selling.

In situations involving a breach of licence Ofgem currently has the power to fine energy firms up to 10% of their turnover, with the proceeds going in to Government coffers. The proposals – part of a consultation launched by the Department of Energy and Climate Change today – could feature in the energy bill, which is due to be published later in the year.

The news follows a £4.5 million payout from EDF Energy who last month agreed to compensate customers for making misleading sales claims. As a result refunds of around £50 will be making their way to around 70,000 households. However, the compensation was paid voluntarily. Similarly, in October and November last year two of the “Big Six” – British Gas and npower – were fined £2.5 million and £2 million respectively due to mishandling consumer complaints. Energy firms receive rising complaints and under the new proposals payouts like these will be imposed and compulsory.

“Customers who have felt the detriment caused by energy firms’ mistakes should also feel the benefit of any fine the firm faces. Money should be going back into consumers’ pockets when they have lost out – not into the Treasury’s coffers, as is the case with fines now,” said Audrey Gallacher, welcoming the news. Gallacher is the director of energy at Consumer Focus.

The executive director of Which?, Richard Lloyd said Ofgem deserved to be given the same powers as its regulatory peers. “It has a duty to protect consumers and should be able to force suppliers to provide redress for customers, as other regulators do.”