Over £1million of compensation paid to energy customers every month in 2023, says Ofgem

Charities, community projects and customers benefit from £72million payments thanks to Ofgem enforcement action

• Milestone year sees Energy Redress Fund smash through £100m barrier since it was set up in 2018
• More than £1 million a month in compensation paid to customers
• Money recovered from energy companies used to support vulnerable customers

Millions of pounds recovered from firms by Ofgem have been used to help communities across the country in 2023.

Ofgem steps in when energy companies breach their licence conditions or are found to be failing customers.

In 2023, the regulator recovered a total of £77.2m in fines, customer refunds, compensation and alternative action payments – up by £50.5m compared to 2022’s total of £27.3m. This includes £5m worth of fines.

Examples of breaches include three electricity generators that unfairly raised consumer bills, poor customer service including unacceptable call waiting times and failure to automatically provide compensation for delays in final billing when switching.

As well as fines and alternative action payments, Ofgem also made energy firms pay £13million to customers in 2023 – over a million pounds a month – for poor service.

The vast majority of money recovered from energy companies this year – set to reach over £57m- was paid into Ofgem’s Energy Redress Fund, which benefits charities and community projects that help vulnerable customers with energy-related support.

Cathryn Scott, Director for Enforcement and Emerging Issues at Ofgem, said:  

“Protecting customers and ensuring that they are treated fairly is at the heart of Ofgem’s mission. 

“That’s why we make suppliers pay when they break the rules or fall short of the high standards we set – and when they do, it’s only right that customers should be the ones who benefit. 

“Every year, the Energy Redress Fund makes a positive difference to the lives of customers across Great Britain, particularly people who are struggling and vulnerable, so to see the fund pass the £100m mark is a significant milestone. 

“This could not have happened without the thorough investigative work of our compliance and enforcement teams to identify licence breaches or poor behaviour by energy companies, or the Energy Saving Trust who ensure the money is targeted to reach those in need.” 

Since it was set up in 2018, the fund, managed by the Energy Saving Trust, has received more than £137 million and handed out £102million in grants to 538 projects across England, Wales and Scotland. A further £35 million in funding will be available to be distributed to new and existing projects, and a new round of grant applications is due to open in the new year.

The nature of support provided varies widely but includes:

• £20m in fuel vouchers issued to charities to identify and provide help to vulnerable customers at risk of disconnection from their energy supply
• Providing energy advice to more than 500,000 households and installing energy saving methods for more than 150,000 homes to help reduce bills
• Working to ensure that future home heating controls and new energy technologies work for everyone including people living with disabilities

This is in keeping with Ofgem’s mission to protect consumers from unfair costs and to drive up standards throughout the energy industry. The significant rise in fines reflects Ofgem’s proactive work to identify issues via a range of methods.

Among the 538 projects supported by the energy redress fund is the Warm Hubs centre in the coastal village of Seahouses, Northumberland.

Redress funding has helped to drive the development of this vital community resource, established by the Community Action Northumberland charity, and a lifeline service last winter at the height of the energy crisis.

Created as a response to tackling fuel poverty, Warm Hubs offer a safe, warm and friendly environment where people can get information, advice, access to services as well as refreshments and the company of other people.

Energy saving advice and guidance on home insulation is also provided by onsite Community Energy Agents to help people take positive action in their own homes to cut bills.

These Warm Hubs became an integral part of communities across Northumberland during Storm Arwen in November 2021, when widespread damage to the network left 4,000 homes without power for more than a week.

With emergency generators set up at the Warm Hubs, people had a place where they could come for a hot meal and a warm shower.

Christine Nicholls of Community Action Northumberland (CAN) said:  

“Without the support of Redress and Vulnerability and Carbon Monoxide Allowance (VCMA) funding we would not have been able to support the huge number of rural households through the recent energy crisis. We are very proud of our Warm Hub scheme.” 

Laura McGadie, Head of Energy at Energy Saving Trust, said:  

“We are pleased to have managed the distribution of more than £100 million in much-needed funds from the Redress scheme to frontline charities and social enterprises since 2018. 

“The projects funded by the scheme are helping customers in the most vulnerable situations through the cost of living crisis, but they also look to the future. 

“Charities and social enterprises have a crucial role to play in ensuring no one is left behind as we transition to net zero and that we all have a voice and a role in the changes that are coming to our energy system.”