Government plans new powers for Ofgem

The UK government is to publish plans to give regulator Ofgem new powers to force energy companies to compensate customers for mis-selling and overcharging.

Currently, energy suppliers voluntarily give cash to consumers following errors – but there is no obligation – while Ofgem has been able to fine companies, but that money has gone to the government.

Energy Secretary Ed Davey said he wants to bring Ofgem in line with other regulators such as Ofcom and the Financial Services Authority, who can ensure compensation goes to customers.

The redress could include pound-for-pound compensation, goodwill payments or public apologies.

“I want to make sure that consumers are protected and that the independent energy regulator has the powers it needs,” he said. “The government has already strengthened Ofgem’s hand by making it harder for energy companies to block licence changes, and introduced tougher rules on the information suppliers have to provide to their customers.

“We are now looking at beefing up Ofgem’s powers further so that, should the need arise, it can make companies compensate consumers directly, rather than necessarily having to rely on a voluntary approach.”

The consultation will be published tomorrow and will run until 2 July.

Since 2007 the regulator has negotiated £6 million worth of compensation for consumers, and imposed fines totalling over £18m.

Sarah Harrison, Ofgem’s senior partner in charge of enforcement, said she welcomed the proposals: “These powers, which we have been seeking from government, would strengthen our ability to take more targeted action against companies that are found in breach of their licence.”

Audrey Gallacher, director of energy at Consumer Focus, said: “This is a really welcome move from the government.”