Ofgem launches consultation promising better energy deals for micro businesses

Ofgem, the energy regulator, has set out its final proposals to address key issues faced by micro businesses in the retail energy market as part of a new consultation.

The reforms, following the Microbusiness Strategic Review by the regulator, crack down on poor practice by energy brokers, and Ofgem’s package of support would mean that information on broker commissions is clearer for customers, and would introduce a 14-day cooling-off period for new deals.

Micro business customers would also get access to an independent dispute resolution service if things go wrong. Ofgem will work with Citizens Advice to increase awareness among businesses on their consumer rights and the business energy market.

“With the impacts of the pandemic still being felt by many micro businesses, it’s even more important to listen to the challenges these customers are facing in shopping around for their energy,” Anna Rossington, Ofgem’s interim director of retail, said.

“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.”

The Association of Convenience Stores (ACS) has welcomed the consultation, saying it’s time for Ofgem to implement long overdue energy reforms for micro businesses.

“This is a welcome step forward from Ofgem, but one that we have seen several times before,” James Lowman, ACS chief executive, said. Many of the specific measures being proposed in this consultation have been being discussed and put forward in various guises for the last decade, but ultimately little action has been taken.

“We urge Ofgem to implement these reforms to the micro business energy market as soon as possible to give the smallest businesses the protections they need when dealing with energy companies and brokers.”

The measures would take effect from later in 2021 following the consultation which closes on 9 July.

The specific measures proposed in the consultation include:

• 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
• Clarifying and strengthening existing supply licence obligations to provide information about brokerage costs on contractual documentation
• Introducing a requirement for suppliers to only work with brokers signed up to a qualifying alternative dispute resolution scheme
• Introducing a 14-day cooling-off period for micro business contracts
• Banning suppliers from requiring micro businesses to provide notice of their intent to switch
• Working collaboratively with Citizens Advice to create new and updated information so that micro businesses 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.

Ofgem’s definition of a microbusiness requires a business to meet one of the following criteria:

• Fewer than 10 employees (or their full time equivalent) and an annual turnover of less than €2 million
• Annual electricity consumption of less than 100,000 kWh, or
• Annual gas consumption of less than 293,000 kW

A store with energy costs of around £10,000 - £12,000 a year for each fuel will typically fall into the category of micro business.