Citizens Advice estimates that close to 1 million UK businesses are in danger of being ripped off in the business energy markets. This is not acceptable. UK businesses deserve fair and transparent business energy switching services.
Micro-businesses* often rely on energy brokers to find the best non-domestic energy contract, yet the lack of transparency on broker fees and common cases of broker mis-selling can contribute to businesses failing. With Ofgem’s latest announcement, rogue energy brokers are a thing of the past.
The aim of Ofgem’s Policy Consultation
Over the years, the regulatory framework for protecting micro-businesses has been growing. Research and surveys have shown that despite the evolution, the market is not working well for some micro-business owners.
Unfortunately, there are a lot of factors contributing to the problem. For instance, some minority brokers operating in the micro-business market have a detrimental impact on consumers. They provide a lack of transparencies about commission costs. There’s also the issue where a large portion of micro-businesses are not engaging with the market. These businesses do not switch suppliers because they believe that all companies charge the same rates.
Ofgem’s proposed policy measures
Broker conduct principle - These principles are requirements for suppliers, so they can ensure that the brokers conduct themselves properly.
Broker dispute resolution - This will require suppliers to only work with brokers that have an alternative dispute resolution scheme.
Informed contract choices - This policy measure will apply targeted sales and marketing rules to the suppliers and brokers they work with. It will do this through supply licence changes.
Broker commission transparency - One of the pressing problems of micro-business is transparency. With this policy measure, it will clarify and strengthen existing supply licence obligations. It will give information about broker commission payments.
Cooling-off period - There will be a 14-day cooling-off period for micro-business contracts.
Contract extensions - Energy suppliers will have to maintain existing contract rates from up to 30 days with this policy measure. This is to give consumers more time while fixing problems with the block switch.
Banning notification requirements - Through this policy measure, micro-businesses are no longer required to provide notice of their intent to switch. It bans suppliers from asking such notices.
By considering Ofgem’s proposals, you can see that their purpose is to create a market that’s much more transparent. Micro-businesses will gain better positions in dealing with energy deals.
This is also timely, especially in the wake of COVID-19. Micro-businesses are emerging from the challenges posed by the pandemic. That is why a well-functioning market has never been more relevant. The only downside for it is that the proposals are still subject to consultation. We have to wait until 2021 for the implementation. But at least we are in the right direction.
At EnergyBillKill, we support wholeheartedly the proposals taken by Ofgem. We follow their principles and have always been transparent with our customers. As a micro-business owner, you don’t have to worry about overpaying for energy.
*According to Ofgem, your business is classed as a microbusiness if:
It uses less than 100,000 kWh of electricity a year OR
It uses less than 293,000 kWh of gas a year OR
If your business has fewer than 10 employees (or their full-time equivalent) and its yearly turnover, or yearly balance sheet, is not more than €2 million.