Ofgem reforms could see customers get automatic compensation on energy bills

Households will be offered more protections from energy providers under major plans to reform the energy regulator Ofgem.

Under Labour's plans, the watchdog could get new consumer-facing powers, including shortening the eight-week mandatory response time when people complain to their energy supplier and establishing automatic compensation for customers when things go wrong with their energy bills.

The watchdog could get new consumer-facing powers, including shortening the eight-week mandatory response time when people complain to their energy supplier. The government hopes the move will help rebuild trust within the sector. Trust in providers—and the regulator—was essentially obliterated in 2022 when energy prices skyrocketed, causing a swathe of smaller suppliers to collapse.

Alongside this, larger energy firms were accused of profiteering from Russia's invasion of Ukraine, which caused wholesale gas prices to rise. In response, firms hiked energy bills spectacularly, claiming it was needed to help cover the increased costs, but then subsequently reported record-breaking profits. Energy consumers minister Miatta Fahnbulleh said the Government has "learned from the energy crisis" but noted that bills were still too high.

Fahnbulleh said: "We will ensure that working people have access to the best possible support to choose more affordable, smarter, clean energy that is right for them. Energy bills are still too high and that is why we worked with suppliers to announce £500million of additional winter support."

In November, Ofgem announced the energy price cap would rise by 1.2% in January, the second increase in a matter of months after a 10% hike in October. Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets. Although energy bills are down from their peak in 2022, they are still very high compared to the previous ten years.

Officials said the Ofgem reforms would focus on improving the bill-paying and complaints process. The review will also examine how Ofgem can address wider issues, such as making homes more energy efficient with heat pumps and solar panels.

Ofgem chief executive Jonathan Brearley welcomed the review, adding that “a great deal” has changed since the regulator’s remit was set out 25 years ago. He also said the recent crisis was "an important reminder to all that protecting consumers must remain the focus no matter what challenges we face".

He added: "We have already made significant reforms to stabilise the market, drive investment in our infrastructure and begin to improve standards. However, we know more can be done with more powers."

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