Energy customers get switch rights under Ofgem plans
Households with pre-payment meters who owe up to £500 to their energy supplier will be able to switch to cheaper deals with another firm under new measures.
Customers of the biggest six companies are currently able to move only if they have debts of less than £200.
Regulator Ofgem has already been urging firms to work more closely with bill-payers and limit disconnections.
Meanwhile, the energy secretary has unveiled plans to compensate customers if suppliers break industry rules.
Ofgem is to be given the power to force firms to make direct payments to households after mis-selling and other breaches, rather than imposing fines which go to the Treasury.
Under the regulator's announcement, British Gas, EDF, Eon, SSE, Scottish Power and Npower will allow people on pre-payment meters to switch from 1 November.
It is thought tens of thousands of users will be helped by the move.
There are 320,000 gas and 315,000 electricity customers with pre-payment meters who owe money to their supplier, according to Ofgem.
The majority racked up the debts when they were given credit by the suppliers and moved to pre-payment meters as a condition of their repayment plans.
Ofgem is due to report figures next week that will show a 59% fall in the number of people disconnected from their gas supply and a 54% drop in electricity disconnections, partly as a result of people being given more time to repay debts.
However, the average amount of debt people are repaying on their gas accounts rose to £371 in 2011, up from £339 the previous year.
Meanwhile, the average electricity debt fell slightly to £357.
Sarah Harrison, senior partner for sustainable development at Ofgem, said: "We welcome the significant falls in the number of households being disconnected, but Ofgem remains determined to ensure suppliers continue to focus on helping consumers manage their energy bills and reduce their debt."
Ofgem already has the power to penalise energy firms heavily when they break the terms of their licences, for example by mis-selling products or overcharging, but the money from those fines goes straight to the government.
The new powers will allow Ofgem to force suppliers to pay compensation directly to their customers, in cases where a voluntary agreement cannot be reached.
They also include a £5m fund for schemes which bring local people together to switch energy supplier en masse in a bid to secure lower bills.
The cash will go to the best initiatives drawn up by local councils and community groups, with Mr Davey warning that without them the best deals were reserved for "well-heeled internet savvy" consumers.
He was inspired to offer the funding after being present at the launch of such a move in Cornwall - set up jointly by a local authority, the NHS, a trade union, the Eden Project and a brewery.