Ofgem said it wanted households to receive at least £30 for each switching difficulty, saying "too many" consumers were encountering problems.

These included, the regulator said, people being mistakenly switched to another supplier, switches taking longer than 21 days to complete and providers taking too long to refund credit balances.

The watchdog and consumer groups say switching remains the most effective way of cutting bills - often by hundreds of pounds a year - as the Government moves to crackdown on standard variable and default tariffs through a planned cap.

:: Tougher Ofgem rules to knock £5bn from energy bills

Ofgem said its plans were part-based on research which found many are put off changing supplier for fear of something going wrong or because of previous bad experiences.

A gas hob is seen in this photo illustration taken in London December 2, 2013.
Image:Energy bills are rising again as wholesale gas and electricity costs are higher than in 2017

The regulator said that while the vast majority of switches do go smoothly, it was important to provide "peace of mind" to consumers financially.

It hoped the threat of compensation bills, intended to be in place by the end of 2018, would also serve as a wake up call to energy companies.

Rob Salter-Church, interim executive director of consumers and markets at Ofgem, said: "While the vast majority of switches go smoothly, too many problems are still occurring.

"These can cause inconvenience, and in some cases, real worry and stress for those affected.

"Today's proposals for automatic compensation will strengthen protection for consumers who switch, and should serve as an incentive for suppliers to get switches right first time."

The compensation measure forms part of the watchdog's efforts to bolster switching, which hit record levels last year as the so-called 'big six' firms came under pressure on default tariffs.

:: Ofgem imposes ban on catch-up energy bills

As the Government continues to seek a cap, expected by this coming winter, the cost of energy bills has been rising as raw energy prices have increased.

Companies have also cited a growing cost of Government energy initiatives as a reason for raising standard prices.

Richard Neudegg, Head of regulation at, responded to Ofgem's plans by saying: "With record switching rates and savings of up to £491 on offer, households are benefiting from the huge choice available in the UK energy market.

"The vast majority of switches go through without any issue. However, any moves which provide further reassurance and engage more consumers so that they can find better deals are a positive step forward for energy customers."