Recommendation 34

HM Government Rejected

The Government is aware of instances of opaque and, at worst exploitative, tactics being used in the non-domestic energy market. This is why the Government and Ofgem are taking decisive action to inform and protect non-domestic energy consumers as well as improving access to redress when issues occur. Direct support is available for microbusinesses with advice and advocacy through Citizen’s Advice, and dispute resolution is available for both small and micro businesses through the Energy Ombudsman if the consumer is not satisfied with how their supplier or energy broker resolves a complaint. Government recently announced plans to appoint Ofgem to regulate Energy Brokers and other third-party intermediaries, when Parliamentary time allows. Many businesses engage with the energy market through these service providers and the behaviour of some rogue actors in the broker sector has been the root cause for some businesses feeling trapped on expensive energy contracts they did not fully understand. As the independent regulator, it is Ofgem’s responsibility to ensure energy consumers are treated fairly. The Government supports Ofgem in continuing to explore ways to improve outcomes for non-domestic energy consumers, including considering recommendations made relating to a cap on out-of-contract rates and a 14-day cooling off period. The use of security deposits was substantively reviewed by Ofgem as part of their wide ranging non-domestic market review published in 2023. This recognised the role that deposits play in managing supplier risk and allowing customers viewed as less credit-worthy to access contracts, while issuing best practice information to standardise supplier behaviour. The Government and Ofgem continue to explore options for improving consumer outcomes in this area. Ofgem’s review also examined out-of-contract and deemed rates in the non-domestic market. Responding to the consumer challenges identified, Ofgem issued legally binding guidance which clarified that suppliers cannot charge deemed rates which are significantly more profitable than typical contracts. The Government supports Ofgem exploring options to improve protections in this area, informed by recent data and consumer experiences. Cooling off periods are a complex issue in the non-domestic market. If consumers could cancel their contracts for up to 14 days after agreement, suppliers would need to insure themselves against wholesale market price changes over those 14-days, adding those costs to their price for all consumers. While poor sales practices, such as verbal contracts, can be a problem, it often takes months or years for consumers to realise that they were misled or sold an inappropriate contract. At that point, dispute resolution is the appropriate route, which is why the Government is taking steps to strengthen the Energy Ombudsmen to improve access to redress for these businesses. Regulation of third-party intermediaries will also allow Ofgem to crack down on the sales practices which ultimately drive these harms.