Ofgem consults on package of proposals to help microbusinesses in the retail energy market

Photo by Sora Shimazaki from Pexels: https://www.pexels.com/photo/crop-colleagues-shaking-hands-in-office-5673488/

Ofgem has launched a statutory consultation confirming their proposals to address a number of key harms faced by microbusinesses in the retail energy market as identified by their Microbusiness Strategic Review.

Energy brokers help busy microbusinesses to compare the market and find a better deal on their energy.

However, according to Ofgem, a minority of brokers engage in poor practices with opaque fees for brokerage services.

The regulator explained that 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.

Ofgem’s Interim Director of Retail Anna Rossington commented: “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.”

In July 2020, Ofgem consulted on their initial package of proposed policy measures designed to improve microbusinesses’ experience of the market.

Having reviewed consultation responses, held a number of virtual stakeholder workshops, gathered additional industry data and accounted for developments in government policy, the regulator has refined its plans and are now consulting on a finalised package of proposals:

  • 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.

Following the closure of this statutory consultation, Ofgem expects to issue a final decision in summer 2021 and then anticipates policy measures to take effect from autumn 2021 onwards.

This consultation closes on 9th of July 2021.

More information about this consultation and how to take part is available on the Ofgem website.