Ofgem confirms greater protection for businesses

Businesses will get fairer treatment, more support resolving disputes and greater transparency on broker fees under new rules announced by Ofgem today.  

The changes will apply to the non-domestic energy sector, which includes businesses, public services like sports centres and village halls, utilities, charities and more. The new rules will make sure energy suppliers improve customer service, open doors to alternative dispute resolution schemes and clearly set out costs for businesses, including fees paid for third party services, like energy brokers.  

Under the changes, Ofgem will from 1 July 2024: 

• Expand the Standards of Conduct to apply to all businesses of any size, rather than just Micro Business consumers. This will give Ofgem powers to take action against suppliers that do not treat non-domestic customers fairly.  
• Introduce a new supply licence rule for non-domestic suppliers which requires them to signpost Micro Business consumers to Citizens Advice and Citizens Advice Scotland, who can offer support and advice when they have an issue. This will also apply to Small Business consumers from December 2024, subject to the new definition entering legislation. 

Further changes, that Ofgem expects to be in place by the end of the year, include: 

• Expanding the requirement for a contract's principal terms to clearly display any broker fees from Micro Business consumers to all non-domestic customers. This will apply to contracts signed on and from 1 October 2024 and suppliers must make this information available upon request. 

From December 2024, in line with the government's proposed new Small Business consumer definition entering legislation, Ofgem will also:  

• Update the Complaints Handling Standards to ensure suppliers put in place suitable complaints processes for Small Business consumers and point them to the Energy Ombudsman when a customer does not feel the issue has been resolved. 
• Implement a requirement for suppliers to only work with Third-party Intermediaries (TPIs), often referred to as brokers, that are members of a redress scheme when securing Small Business contracts. This will provide reassurance to business customers that they are able to access dispute resolution schemes and get a fair and suitable outcome. 

Tim Jarvis, Ofgem's Director General for Markets, said: 

"Too many businesses have experienced issues with some energy suppliers, from difficulty getting the right contracts, unexplained price hikes, and poor customer service.  

“We've worked hard to understand the breadth of issues and where the powers we have to tackle them can be improved. These new rules will help ensure businesses get the service they deserve. 

“We'll be speaking to businesses of all sizes as these rules come into force throughout this year to make sure they are being followed by suppliers. We'll also continue to work with government, industry, and consumer groups to see what else can be done to support non-domestic consumers.”  

Ofgem's new rules come as the government confirms plans to expand its definition of Small Businesses, meaning businesses with less than 50 employees and a certain turnover or using a certain amount of energy can take complaints about their energy supplier to the Energy Ombudsman.  

Under new Ofgem rules, Small Businesses will also be able to resolve disputes about third parties like energy brokers with redress scheme providers, such as the Energy Ombudsman and the Utilities Intermediaries Association (UIA). This was previously only available for Micro Business consumers so the change will give more businesses access to independent support with complaints. 

The changes being brought in by Ofgem to help businesses result from concerns shared last year about problems including poor customer service and complaint handling from those in the non-domestic energy market. This prompted a joint deep dive to learn more about these issues with the Department for Energy Security and Net Zero (DESNZ), the full results of which have now been published. 

More than half of those taking part in the research (58%) said they were concerned about the impact of energy prices on their business, with 42% reporting they were very concerned. And almost two thirds (60%) of businesses were satisfied with the overall service they had received from their supplier, with 13% saying that they were dissatisfied. 

The main reasons consumers said they were dissatisfied included the service being too expensive, poor customer service, and poor communication from their supplier. 

ENDS 

NOTES TO EDITORS  

• A Micro Business consumer uses less than 100,000 kWh of electricity a year; uses less than 293,000 kWh of gas a year; or has fewer than 10 employees (or their full-time equivalent) and an annual turnover total not exceeding 2 million Euros (equivalent to £1.716m according to Xe on 22 March 2024).  
• Today's announcement aligns with the new Government definition of Small Business and support from the Energy Ombudsman to cover businesses with fewer than 50 employees and an annual turnover of £6.5 million or a balance sheet total of £5 million; or an annual electricity consumption level of 200,000kWh; or an annual gas consumption level of 500,000 kWh. 
• We are currently aware of two redress schemes in operation which can provide support in resolving consumers' disputes with an energy broker: 

• The Energy Ombudsman 
• The Utilities Intermediaries Association (UIA) 

• The new changes being introduced follow from a Call for Input on the Non-Domestic Gas and Electricity Market and a Non-Domestic Market Review Findings and Policy Consultation. The statutory consultation on the proposals ended earlier this year.    
• We recently published a report of findings from research conducted with non-domestic energy customers. This research was commissioned by Ofgem and DESNZ to build on existing evidence about non-domestic consumers' experiences of the energy market.