Your independent energy adviser
0800 051 5770

Ofgem’s Micro Business Folly

In the latest anomaly of their own making, Ofgem are in the process are redefining a definition that they redefined after defining it in the first place with a defined intent to provide a two-tier level of standards in energy procurement and supply for businesses of varying sizes.

Rather than just enshrining a single standard of service expectation for all businesses, Ofgem, in their wisdom decided to spend considerable time creating an unworkable and inexplicable definition of a “Micro Business”.

For more information see our Guide to Micro Business energy supply.

Unfortunately Ofgem’s amendments haven’t focused on two critical errors with the definition, those being:

  1. it is virtually impossible for a business to identify themselves against the criteria required
  2. it still creates a subset of the market subject to minimum standards, whilst other businesses remain exposed

The definition of Micro Business sits in the snappily titled Standard Licence Condition 7A (SLC 7A) of the gas and electricity supply licences. These are the licences that any business energy supplier must hold in order to provide their services to the market.

The changes made were:

  • An increase in the level of consumption a business can use annually before they can no longer be termed as a Micro Business. That is 100,000kWh of electricity and/or 293,000kWh of gas.

Ofgem proudly say that this change will bring Micro Business definition to a further 160,000 business in the UK.

In addition Ofgem’s revised definition required a business to:

  • Have fewer than ten employees (or their full-time equivalent)
  • Have an annual turnover or annual balance sheet total not exceeding €2m.

Note how helpful it was of Ofgem to stipulate the € as the measure of financial performance!

If it wasn’t disappointing enough that a two-tier set of standards was allowed to developed and was indeed enshrined by Ofgem, the opacity of the criteria and its application to the average business renders the whole exercise farcical.

As if things could not prove more unhelpful, what appears to be an oversight on Ofgem’s behalf has led them to making a plea for “voluntary agreement” from energy suppliers to overlay the latest ‘definition’ over areas where contradictory definitions are already in place!

In particular the reference is to where the revised definition with increased expanded consumption bandings means those 160,000 businesses now additionally ‘captured’ will not have the same statutory rights as smaller micro businesses with regards to complaints as each runs to different definition criteria!

With no apparent embarrassment Ofgem have called for:

“all micro-business covered by our expanded consumption thresholds [to] have access to the same complaint handling and redress arrangements as smaller micro businesses.

“We strongly urge licensed suppliers and related organisations to adopt the following steps as best practice until the legislative amendment referred to above takes effect:

“[To] handle all complaints from micro-business consumers covered by the amended definition in SLC 7A in accordance with the requirements of the Electricity and Gas (Consumer Complaints Handling Standards) Regulations 2008 relating to micro- business consumers”

And all the while businesses are none the wiser whether they fit the definition of a Micro Business, in any of its forms, and indeed what such a categorization affords them or otherwise.

For full disclosure:

Business Juice have consistently called on Ofgem to abandoned the misguided folly that is ‘Micro Business’ and the various definitions employed and instead to set universal minimum standards of contracting, pricing and servicing requirements across all business, whatever shape or size, in Euro or otherwise.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.