The Energy Ombudsman's Compensation System

Stuart_

Hello Everyone,

I thought it would be beneficial to shed some light on the Energy Ombudsman's approach to awarding compensation, especially for those who may be seeking resolution for their disputes through them.

Firstly, the Energy Ombudsman often states that they compare your case to other cases to determine the amount of compensation awarded. However, it's important to understand that they're not reviewing individual cases and comparing them directly with yours. Instead, they have a formula into which they input the parameters of your case, such as the number of service shortfalls, the duration you had to wait, etc. This formula then provides the compensation amount.

While the Ombudsman is allowed to award up to £10,000 in compensation, the average amount awarded is around £50-£70 (after adjusting for inflation). This, as many would agree, is on the lower end of the compensation scale.

In 2012, 2013 and 2014 the average compensation was £135, in July 2014 the average compensation moved down to £100, in 2016 the average compensation dropped to £50 and has remained at that level for 7 years.

So, why are the awards generally smaller? The system in place appears designed to keep awards within a certain range. The Ombudsman's decisions can be appealed by the energy suppliers, and if an award is much higher than the 'norm', it could be challenged for being out of line with what's usually awarded.

What does this mean for us, the consumers? Unfortunately, it suggests that compensation awards may not fully reflect the individual circumstances or true merits of a case. The formulaic approach can limit the chances of receiving larger compensation amounts. The energy suppliers are aware of this, which, arguably, could influence their approach to resolving complaints before they reach the Ombudsman.

While it's always worth trying to resolve issues through the Energy Ombudsman, it's important to go in understanding how the system works, and managing expectations accordingly. It's yet another aspect of the energy sector that warrants discussion and possibly, reform.

A crucial point to note is the lack of transparency surrounding the formula the Energy Ombudsman uses to calculate compensation amounts. They often state that they compare your case to similar ones, but they don't disclose the specific factors or calculations that are part of this formula. This opacity adds another layer of complexity to the process and raises questions about how decisions are made and how fair they are. In the interest of transparency and fairness, it would be beneficial for consumers to understand how the compensation is computed.

I hope this information helps and prompts some thoughtful discussion.

JSHarris

My experience of spending the best part of nine months going through a complaint with the Energy Ombudsman can be summed in in a single word: "toothless".  My view is that they were beholden, fearful even, of the lobbying power and political clout wielded by the energy companies.  Even when presented with clear, hard, evidence of major errors they still seemed reluctant to act.

On the plus side they did get back about 90% of the money we were owned.  On the minus side they seemed to take the view that we should be grateful to only lose about £100.  My overall impression was that they did the bare minimum needed to avoid themselves being the subject of further action.  I was also convinced that they took into account the likelihood of someone taking further legal action and used that to inform their decision.

CSI_Yorkshire

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

Stuart_

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

I agree that the Ombudsman's primary function is to ensure the resolution of issues, but the power to award compensation is a necessary part of their toolkit. The point isn't about cultivating a 'compensation culture', but rather, it's about ensuring there's a system in place to recompense consumers who've been genuinely wronged. The issue I raised was about the transparency of how this compensation is calculated. It seems like a black-box process that could benefit from more clarity. As for costs, they could indeed increase if mismanagement or negligence isn't rectified, which I think underlines the importance of an effective and transparent Ombudsman service.

JSHarris

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

I wholeheartedly agree, heaven help us if we go the way of the USA.  In my case I didn't ask for, or receive, any compensation.  I just wanted the large sum of money taken from my bank account in error (because our meter was confused with someone else's by the energy company - there was an MPAN mix up) returned.  In the event I didn't even get that.  About £900 was refunded (eventually) but the remaining ~£100 never was.

Stuart_

Welcome to the realm of capitalism. Whether we appreciate it or not, we're already transitioning into a system similar to that of the United States.

Additionally, I don't believe that endorsing lesser settlements from the ombudsman will halt this transition.

Chrysalis

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

Compensation should exist, if anything to serve as a deterrent, if the worst case outcome for a company is simply to rectify the problem, then the company basically has zero risk for doing something wrong, as a absolute worst case scenario is they then have to do what they should have done in the first place, its a bit like been told you will always get your stake back when gambling win or lose.

mmmmikey

Chrysalis said:

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

Compensation should exist, if anything to serve as a deterrent, if the worst case outcome for a company is simply to rectify the problem, then the company basically has zero risk for doing something wrong, as a absolute worst case scenario is they then have to do what they should have done in the first place, its a bit like been told you will always get your stake back when gambling win or lose.

But the worst outcome isn't small amounts of compensation - energy suppliers are also fined heavily for poor service or not following the rules. And of course they stand to lose customers - we really need to find a way to get customers to vote with their feet. Ofgem have made it very easy for most people to switch, now we just need more people to do it rather than put up with bad service. Surely much better to have an environment where suppliers are competing to provide the best service in order to increase their customer base than an environment where they're doing the minimum they can get away with? The power to create that environment lies with us as consumers - we just need to persuade more people to switch if the service they get is unacceptable. 

CSI_Yorkshire

I agree mmmmikey.

I'd much rather there were proper fines, that then get used for something sensible (winter fuel, hardship funds, take your pick) than giving several thousand pounds to individuals who haven't suffered any great loss just because they shout louder or threaten with lawyers.  That's the way it would end up if compensation became the aim.

JSHarris said:

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

I wholeheartedly agree, heaven help us if we go the way of the USA.  In my case I didn't ask for, or receive, any compensation.  I just wanted the large sum of money taken from my bank account in error (because our meter was confused with someone else's by the energy company - there was an MPAN mix up) returned.  In the event I didn't even get that.  About £900 was refunded (eventually) but the remaining ~£100 never was.

That's harsh, you should have got everything back, plus fees incurred etc (if there were any). I'd also include costs of telephone calls for chasing and things like that, probably even missed interest on the money you would have had.  That's the correct recompense in my eyes, to put you back in the position you would have been without the mistake.

MattMattMattUK

Chrysalis said:

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

Compensation should exist, if anything to serve as a deterrent, if the worst case outcome for a company is simply to rectify the problem, then the company basically has zero risk for doing something wrong, as a absolute worst case scenario is they then have to do what they should have done in the first place, its a bit like been told you will always get your stake back when gambling win or lose.

I hugely disagree, compensation culture is already getting out of hand and it seems people are obsessed with it. One only has to look at issues people come to this site with, they are not interested in solving the issue, they are not after solutions they are obsessed with and feel entitled to compensation, often for minor issues and in some cases where they are the ones responsible for the issue they are experiencing. 

As Mikey says, fines and better regulation are the way forward, not compensation. 

Xbigman

CSI_Yorkshire said:

I agree mmmmikey.

I'd much rather there were proper fines, that then get used for something sensible (winter fuel, hardship funds, take your pick) than giving several thousand pounds to individuals who haven't suffered any great loss just because they shout louder or threaten with lawyers.  That's the way it would end up if compensation became the aim.

JSHarris said:

CSI_Yorkshire said:

The Ombudsman is there to make sure problems get fixed, not to award compensation.

Compo culture just makes everyone defensive and overall increases costs.  Lets not go the way of the USA.

I wholeheartedly agree, heaven help us if we go the way of the USA.  In my case I didn't ask for, or receive, any compensation.  I just wanted the large sum of money taken from my bank account in error (because our meter was confused with someone else's by the energy company - there was an MPAN mix up) returned.  In the event I didn't even get that.  About £900 was refunded (eventually) but the remaining ~£100 never was.

That's harsh, you should have got everything back, plus fees incurred etc (if there were any). I'd also include costs of telephone calls for chasing and things like that, probably even missed interest on the money you would have had.  That's the correct recompense in my eyes, to put you back in the position you would have been without the mistake.

There are proper fines, that's why energy companies pop up in the news now and then being ordered to pay millions in compensation to sort problems out, and then they have to pay (sometimes) millions into the OFGEM redress fund. 
To try to regulate the energy system in this country at the consumer level would be ridiculously expensive and you can bet that would get added to all our bills. Having a system that awards relatively low levels of compensation at the individual level to cover minor costs such as phone calls and inconvenience is probably the best way of going about things whether individuals like it or not.


Darren