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Ofgem to overhaul the business energy market

5 Energy Proposals Outlined

Earlier this week Ofgem published its proposals to make the energy market better for domestic customers, and today it has also published its proposals for how it will make the market work better for businesses.

The proposals are the result of the Retail Market Review, which started way back in 2010.

Here are the main proposals and our thoughts on them:

1. Extend protections to more businesses

Currently, protections laid out under the SLC7a set of supplier license conditions only apply to micro businesses. Ofgem defines micro businesses as those consuming less than 200,000 kWh of gas or 55,000 kWh of electricity a year, or who have fewer than ten employees (or their full-time equivalent) and an annual turnover or annual balance sheet total of €2m or less. It is suggesting that the protections should also now apply to business consuming less than 293,000 kWh of gas or 100,000 kWh of electricity a year, or who have fewer than ten employees (or their full-time equivalent) and an annual turnover or annual balance sheet total of €2m or less.

This would mean all businesses that spend up to about £10,000 a year on either electricity or gas would be covered, that’s an estimated 91% of the market, which seems like a very positive step to us. You can find out more about what the protections are in our guide to regulations.

2. Put contract end dates and termination windows on bills

Ofgem wants all suppliers to put the date a customer’s contract is due to end and the date by which customers need to send in a termination notice on every bill, with a view to reducing the number of businesses that get rolled over.

Putting contract end dates and termination windows on bills seems like a very good move for preventing rollover, as it will give businesses all the info they need to understand when to start looking around for a new deal. However, you could argue that perhaps it doesn’t go quite far enough – our research found that 55% of businesses would support a total ban on rollover.

If you can’t wait for your supplier to get round to putting their termination policy on your bill then visit our dedicated supplier pages for all the information about your supplier’s approach.

3. New standards of conduct for suppliers

Ofgem are proposing new and binding standards of conduct for suppliers when it comes to billing, contracting and switching small businesses. This will require them to carry out their actions in ‘an honest, transparent, appropriate and professional manner’ and ‘provide accurate information and ensure customer service arrangements and processes are fit for purpose’.

Whilst this may seem a positive step it is very ambiguous and likely to be open to significant interpretation. Crucially, also, these standards of conduct will not include restrictions on the prices suppliers can charge.

4. The industry should take the lead on objections

Ofgem says it has improved its monitoring of objections to transfer, the practice of your current supplier stopping you leave for your new supplier, but it is calling for industry to take the lead in improving practices.

Objections from a customer’s current energy supplier can often completely derail the process of switching. We have previously called for Ofgem to introduce new rules to make sure objections are fair and can be resolved quickly, so we’re disappointed not to see this make it into the proposals.

5. A single code of conduct for TPIs

Ofgem has said that it will take the lead in developing a new single code of conduct for third part intermediaries or TPIs for energy brokers such as ourselves. It is also launching a wider review of the regulatory framework for TPIs in both the domestic and non-domestic sectors.

We are certainly in favour of a single code of practice for energy brokers and the like to set high standards and protect businesses. However, as we’ve previously argued, we think this should apply to energy suppliers too.

Ofgem expects these changes to come into force in summer 2013, and will be consulting on them until 21st December 2012.

Overall, there are some positive proposals that will make a difference for businesses, although we feel that Ofgem could perhaps have been stronger on some issues. We also hope that the proposals aren’t diluted as they go through the consultation process. It’s a shame that they won’t come into effect until next summer, but hopefully it will be worth the wait.

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