Energy companies have agreed to the creation of a new Energy Supply Ombudsman who will be able to settle disputes on power bills.
The industry has agreed to the demands from regulator Ofgem following pressure for a new way to tackle complaints throughout the energy industry. The new ombudsman will have the power to award customers compensation of up to £5,000.
The ombudsman, Elizabeth France, will deal with complaints from customers without any cost to the consumer, but they have to first try to resolve their complaint with their energy supplier.
An enquiry into billing last year by watchdog Energywatch found that mistakes on energy bills were causing hardship to customers, leading to 39,000 calls to the watchdog throughout 2005.
Biggest complaints against gas and electricity suppliers were due to customers being forwarded the wrong bill or the bills being rolled over a long period of time.
Under the new ombudsman's rules, energy companies will not be able to recover any charges that they have failed to bill a customer for over two years.
"I am very pleased that the industry has taken steps to put its own house in order and has risen to our challenge to deliver a better service for customers," said Alistair Buchanan, Ofgem chief executive.
Watchdog Energywatch has warned the industry that the ombudsman scheme will only work if the energy industry agrees to work with the scheme and reviews their billing processes.
"If companies don't play ball it could take three months of perseverance for a consumer to even get through the door," said Adam Scorer from Energywatch.