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27 Aug 2020

Energy switching problems: are you entitled to compensation?

Too many energy energy companies are failing to follow regulations on refunding credit after customers switch - we explain your rights
woman on the phone looking at an energy bill

New rules on energy bill credit refunds came in from May 2019, but we've found that nearly half of customers who have switched since then and were owed money by their previous energy supplier were not refunded correctly, and some never got their money back at all.

In 2019, energy regulator Ofgem mandated that, if a customer switched away, all energy suppliers had to refund customers any outstanding credit within 10 working days of receiving their final bill. As of May this year, Ofgem also requires energy suppliers to issue a final bill within six weeks.

The intention behind these regulations is to make switching easier for consumers.

However, Which? research found that only 46% of customers that we surveyed and who were owed money were refunded correctly; 35% had to wait longer than 10 working days after their final bill to receive their money, and 7% didn't receive a refund at all*.

And some of the energy customers we surveyed told us that they had to spend frustrating hours trying to claw money back from their old energy suppliers.

If you're looking to switch and want a supplier that will treat you well, use our reviews to find the best energy companies

final electricity bill

How energy credit can build up

If you pay your bill by fixed direct debit, as many energy customers do, your energy supplier will set this when you first switch to it.

The idea, in most cases, is that the payment will reflect your average monthly usage over the year; this usually means you'll be overpaying for your usage in the summer to compensate for higher energy usage in the winter. Some suppliers charge seasonal rates.

If your direct debit is set too high, you may end up paying more than necessary and build up more credit than is needed to cover higher winter energy usage.

You don't want to be in debt to your energy provider after a full year with it, but you also don't want it to be taking more from you than necessary to be refunded at an undetermined later date.

How to get your energy direct debit right

The best way to ensure you aren't overpaying or underpaying for your electricity and gas usage each month is to make sure you're submitting regular meter readings. This should help regulate your bill and your supplier may make adjustments to your direct debit over time to account for this.

If it doesn't do this, and you think your monthly energy bill is higher than it should be, you can ask your energy provider to lower it.

There are lots of ways you can save money on your energy bills. Read our guide to find out how

Compensation for delayed bill credit refunds

If your former energy company fails to follow the rules on refunding energy bill credit within the time periods stated above, it's expected to pay out £30 compensation automatically.

However, our research suggests that suppliers paying automatic compensation is even rarer than them refunding credit in time.

30 pounds cash

Only 6% of people we surveyed who were refunded credit late received compensation automatically and 85% never received any at all. This suggests the actual figure for compensation that should have been paid out is far higher.

Ofgem says: 'Suppliers should be proactively identifying where they miss the guaranteed standards and making a compensation payment accordingly.'

Some suppliers are doing this, with £850,000 of compensation paid to customers whose credit refunds were delayed between May and December 2019, according to Ofgem. But our survey suggests that many others aren't.

How to claim back money you're owed

Unfortunately, claiming back money if a an energy company has failed to follow the rules can mean spending a lot of time on the phone, or chasing suppliers by email. Persistence may be required and some customers might conclude that small amounts of credit are not worth chasing.

frustated man on the phone with energy company

However, if you are going to chase down your money, it's important to know your rights:

  • If your energy company refuses compensation, they must provide you with an explanation of why
  • If your issue is unresolved after eight weeks since your initial complaint, or if you reach a deadlock with your energy supplier, you can contact the energy ombudsman to help resolve your complaint.

When else might you be owed compensation?

Although delayed credit refunds are the most common switching problem that demands compensation, Ofgem lays out a number of scenarios where you should also receive it.

These are:

  • Not receiving your final bill within six weeks of switching
  • Not being refunded credit within 10 days of receiving a final bill
  • Being erroneously switched to a new supplier
  • Your switch not being completed within 15 days.

How to ensure your switch goes smoothly

You shouldn't have to do much to switch supplier. When it goes off without a hitch (and it does for the majority of people), you can choose a supplier and tariff that works for you and save money in the process.

  • Know what your current tariff is and how much energy you use - an annual estimate of your usage should be shown on your energy bill.
  • Work out your potential savings with a comparison service.
  • Apply to switch - your new supplier will inform your old supplier.
  • Send meter reading to your new supplier before you're switched over.
  • Chase your supplier for a final bill if it has been more than six weeks since you switched.

Our energy comparison site, Which? Switch, lets you compare gas and electricity prices to find the best price and customer service for you

*In June and July 2020, we surveyed 538 Which? members who had switched supplier since May 2019. 64% of them were due outstanding credit from their previous supplier, but only 46% of those with outstanding credit were refunded correctly.