The government is to give Ofgem new powers to allow them to force energy companies into offering compensation to customers who have been mis-sold or overcharged. The Energy secretary Ed Davey has said that this will bring the regulator in line with the powers held by other regulators.
The proposals are to go out to public consultation this week and will change the current system where energy providers can be fined up to 10% of their turnover for breaches, with the money going to the government. At present there is no mechanism for giving compensation to customers. However the fine system will remain in place.
Davey points out that the voluntary approach is not enough and that the regulator needs these extra powers to ensure customers are compensated fairly.
It is thought that the compensation will not be capped to prevent energy companies from consciously making a decision to mis-sell because it still produces an overall profit.
Meanwhile Audrey Gallacher from Consumer Focus has said that this is a welcome move from the government – a view which is shared by Richard Lloyd from Which? He points out that consumers should be compensated if they are treated unfairly, rather than the government.