Ofgem, the energy regulator, has set out final proposals to
help millions of microbusiness customers get a better energy
deal (1).
Energy brokers help busy microbusinesses to compare the market
and find a better deal on their energy. But Ofgem found a
minority of brokers engage in poor practices with opaque fees
for brokerage services. In one case, 50% of the total contract
cost (around £24,000) comprised broker commission fees that the
consumer was not made aware of pre-contract (2).
Ofgem’s package of support would mean that information on
broker commissions is clearer for customers, and would
introduce a 14-day cooling-off period for new deals.
Microbusiness customers would also get access to an independent
dispute resolution service if things go wrong.
Ofgem will work with Citizens Advice so microbusinesses know
their consumer rights and how the business energy market works.
(4).
These measures would take effect from later in 2021 following
today’s consultation. In the meantime, Ofgem is urging
microbusinesses to shop around for the best deal.
Ofgem’s Interim Director of Retail Anna Rossington said:
“With the impacts of the pandemic
still being felt by many
microbusinesses, it’s even more important to
listen to the challenges these customers are facing
in shopping around for their energy.
Ofgem’s proposals will crack down on poor practice
and empower microbusiness customers by making it
easier for them to get a better
deal.
We are also sending out a clear signal to
industry about the high
standards we expect.”
Notes to editors
1: ***Link to consultation doc will go here*** Microbusinesses
play a central role in the UK economy, providing a wide range
of products and services. Latest government data suggests that
there were over 5.7 million microbusinesses in the UK by 2020,
accounting for 96% of all businesses, 33% of employment and 21%
of turnover. Microbusinesses make up a significant proportion
of energy expenditure too, with expenditure from all these
meter points accounting for £3.4bn in 2020.
2: Brokers typically acquire commission for their services via
charges included in the consumer’s supply contract. We have
found that opacity around these fees and other poor practices
by a minority of brokers is leading to some microbusinesses
ending up on poor value deals. As one example, we identified a
case involving a large microbusiness where 50% of the total
contract cost (an estimated £24,000) consisted of broker
commission fees that the consumer was not made aware of
pre-contract.
3: In December 2020, the UK Government’s Energy White Paper
committed to helping consumers get a fairer deal, including
ensuring that the retail market regulatory framework covers
third parties such as energy brokers and price comparison
websites. Ofgem supports this commitment and has adapted this
package of reforms to account for BEIS work in this area.
4: The specific measures include:
-
Provision of principal contractual terms:
Strengthening existing rules around the provision of
principal contractual terms to ensure consumers receive this
key information both pre- and post-contract agreement in all
cases
-
Brokerage cost transparency: Clarifying and
strengthening existing supply licence obligations to provide
information about brokerage costs on contractual
documentation
-
Broker dispute resolution: Introducing a
requirement for suppliers to only work with brokers signed up
to a qualifying alternative dispute resolution scheme
-
Cooling-off period: Introducing a 14-day
cooling-off period for microbusiness contracts
-
Banning notification requirements: Banning
suppliers from requiring microbusinesses to provide notice of
their intent to switch
-
Information and Awareness: Working
collaboratively with Citizens Advice to create new and
updated information so that microbusinesses can access
up-to-date guidance and advice alongside communications to
help further boost awareness of how the market operates and
their rights as consumers.
4: UK Government: Department of Business, Energy &
Industrial Strategy (BEIS): Energy White Paper: December 2020:
https://www.gov.uk/government/publications/energy-white-paper-powering-our-net-zero-future
