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Response to Ofgem’s consultation on Supplier Guaranteed Standards of Performance for Switching

10 August 2018

Our response to Ofgem's consultation on Supplier Guaranteed Standards of Performance for Switching. [ 0.59 mb]

Switching problems can cause distress and inconvenience for consumers. Forthcoming research for Citizens Advice has quantified this harm to energy consumers from a subset of switching problems at £9 million each year. There can also be wider consequences, if consumers lose confidence in the switching process. Switching and switching related cases (including final account reconciliation and failure to refund) accounted for around 10.5% of the energy issues seen by the Citizens Advice consumer service over the past year.

The most common switching issues we saw - final account reconciliation, failure to refund and erroneous transfers - will be directly tackled by the proposed Guaranteed Standards. Delayed switches form a smaller area of complaints, potentially because they have lower direct financial impact. However, the data collected for our supplier star rating shows that delayed switches are a widespread problem, with over 18% of gas switches delayed (8.4% for invalid reasons) and over 16% of electricity switches delayed (7.9% for invalid reasons).

We strongly support automatic compensation for these problems as a way of giving consumers redress and incentivising suppliers to improve their services. Compensation which requires consumers to make a claim is less effective and leads to poorer consumer experiences. In research last year we also found that under the energy network Guaranteed Standards consumers missed out on more than £1.2 million of compensation because they didn’t make a claim. It is vital that any new compensation is as automatic and smooth as possible, to minimise these issues. Furthermore, forthcoming research by Citizens Advice shows that a third of energy consumers do not claim compensation they are eligible for, and that over half of those who do claim found it difficult to do so. This is worse than any of the other key consumer markets we looked at.

We generally support the proposals for automatic compensation, but have identified some issues that we think should be resolved:

  • We feel strongly that micro-business customers should be protected by the new Guaranteed Standards, in line with Ofgem’s pledge to improve the protection for these consumers.

  • We are concerned that the standard for consumers to be switched within 21 days (Standard A) is not sufficiently clear for consumers, due to a range of exemptions that can be used by suppliers.

  • The proposals for Standard A require the consumer to make a claim for part of the compensation from the losing supplier. We think this should be paid by the gaining supplier only, because this supplier has more ability to get the switch right. This will also enable the compensation process to be fully automatic.

  • We support further examination of any proposals to align the Guaranteed Standards with the Energy Switch Guarantee. Any changes to the proposals as a result must ensure that all consumers are protected and that the right behaviours are incentivised by all suppliers.

  • We think that there should be a broader standard for supplier communications during the resolution of an erroneous transfer. The current proposal is too narrowly focused on a single communication, and somewhat duplicates the requirement for suppliers to agree erroneous transfers in a timely manner (Standard B).

These proposals are a good step forward that will better protect consumers from switching errors. However, it is also clear that automatic compensation will not be sufficient redress in all cases. Under the Standards of Conduct we would still expect suppliers to consider additional redress in cases where consumers have suffered severe detriment as a result of switching problems.