Ofgem has unveiled plans to tackle unscrupulous energy brokers so
millions of microbusinesses can get a better deal.
Two out of three microbusinesses use an energy broker when
choosing their current energy contract and many of them benefit
from the advice of a reputable broker. However, an Ofgem review
found that in too many cases, microbusinesses are hampered by a
lack of transparency when using brokerage services and end up
being locked into poor value deals because they are not fully
aware of what they are signing up to2.
Ofgem found that a small number of microbusinesses were paying
thousands more than they needed to in broker commission charges.
These proposals will help all those using a broker to get value
for money when using brokerage services.
Today’s proposals will make shopping around for an energy deal
simpler, quicker, and fairer for microbusinesses.
The proposals would require suppliers to ensure that brokers they
work with conduct themselves appropriately when interacting with
customers and to make commission fees and key contract details
clearer.
Where things go wrong, microbusinesses will be able to resolve
disputes with energy brokers through an independent body3.
Microbusinesses will also find it easier to switch as
administrative barriers are removed.
Philippa Pickford, Ofgem’s Director of Future Retail Markets,
Consumers & Markets said:
“Providing greater transparency and tackling unscrupulous brokers
will help microbusinesses get a better, fairer energy deal. This
is more important than ever as microbusinesses emerge from the
challenges posed by the Covid-19 pandemic.
“These proposals are part of Ofgem’s wider work to improve the
energy retail market through smart metering, extra support for
vulnerable customers, plus faster and more reliable switching”.
Case studies
Case study 1
A Business Energy Claims (BEC) case study appears to show a
broker only offering one deal to a golf club despite claiming it
would search the entire market. It later transpired that the deal
contained ‘hidden’ commission of 50% of the golf club’s energy
spend, and the microbusiness felt the five-year length of the
contract was not made clear. BEC estimate that the golf club owed
£24,000 in ‘hidden’ commission charges.
Case study 2
A further BEC case study4 showed that Stranton Social Club’s
energy bills included 41% commission to a broker, which was not
disclosed at the point of sale, nor disclosed or documented on
bills or on the contract.
Notes:
(1) According to UK Government data, there were over 5.6 million
microbusinesses in the UK by 2019, accounting for 96% of all
businesses, 33% of employment and 22% of turnover. For these
measures, microbusinesses are defined as non-domestic consumers
who have fewer than ten employees, with an annual turnover of
less than 2 million euros, or use no more than 100 MWh of
electricity per year, and/or no more than 293 MWh of gas per
year. Not all microbusinesses have a non-domestic energy supply
contract, but we estimate that our proposals will help the
approximately 1.5 million microbusinesses with a non-domestic
electricity or gas supply contract to secure a fairer deal.
(2) In 2019 Ofgem announced a strategic review of the
microbusiness retail energy market. Ofgem has since gathered
robust evidence by analysing industry data, and from listening to
microbusinesses and key stakeholders.
(3): The package of measures set out in the policy consultation
includes:
· Broker conduct principle: Introducing a principles-based
requirement for suppliers to ensure brokers they work with
conduct themselves appropriately
· Broker dispute resolution: Introducing a requirement for
suppliers to only work with brokers signed up to an alternative
dispute resolution scheme
· Informed contract choices: Applying targeted sales and
marketing rules to suppliers and brokers they work with
· Broker commission transparency: Clarifying and expanding
existing supply licence obligations to provide information about
broker commission payments on contracts, bills and account
statements
· Cooling-off period: Introducing a 14 day cooling-off period for
microbusiness contracts
· Contract extensions: Requiring suppliers to maintain existing
contract rates for up to 30 days while a switch is being
processed
· Banning notification requirements: Banning suppliers from
requiring microbusinesses to provide notice of their intent to
switch
· Information: Ofgem also intends working collaboratively with
leading consumer groups to improve awareness raising materials
and information provision.
(4)
https://businessenergyclaims.co.uk/business-energy-claims-announce-court-win-against-utility-alliance/
