Ofgem confirms review of micro business retail market

Energy industry regulator Ofgem has confirmed it is planning a strategic review of the micro business retail market in the coming year.

A microbusiness is defined as a business which consumes no more than 293,000kWh of gas or 100,000kWh of electricity each year or has fewer than ten employees and an annual turnover not exceeding €2 million.

The review will explore whether micro businesses are being abused by energy brokers and suppliers – something they have been accused of doing in the past.

Ofgem added it will be seeking industry views to help inform its decision.

In April last year the government launched a consumer green paper on modernising consumer markets which stated it intends to introduce legislation for civil fining powers – a proposal which Ofgem supports.

An Ofgem spokesperson said: “Ofgem supports the government’s recent consumer green paper proposal to extend consumer law fining powers to us so that domestic consumer protections are strengthened, and additionally propose that this is extended to non-domestic protections.

“As part of our consideration of more fundamental reforms to the retail market, we will carefully consider how the scope and form of our regulation may need to change.

“This year, we will be conducting a strategic review of the micro business retail market to understand market challenges and consumer experience.

“The review will identify the case for short and medium-term actions.

“We expect to publish an opening statement over the coming months and will invite views and evidence from stakeholders to help inform our thinking.”

Phil Foster, chief executive of price comparison service Love Energy Savings, has previously called for more regulation of third party companies.

Foster believes there is currently a “distinct lack of transparency for business owners who are looking to improve their tariffs”, claiming that it is the biggest issue facing the energy industry.

He added: “Small UK businesses are still falling victim to an industry which, at its worst, is an unethical wild west.

“And the most unethical TPIs [third party intermediaries] are preying on micro businesses and weaker SMEs, hitting them with ramped-up prices.

“Unlike in the domestic market — where Ofgem seeks to protect the most vulnerable, typically the elderly — there is no regulation here to support those being overcharged.”

The business energy market is not unregulated and Ofgem has previously taken action against suppliers previously for failures in customer service.

This includes securing a £9.5 million redress package in from British Gas Business in 2017 following failings in its registrations, complaints handling and billing processes for business customers.

Last November UK energy market code managers, Electralink, said it had identified the requirement for an independent code to be signed up to by TPIs and suppliers and to be supported by independent third parties.

Mark Olliver, senior specialist consultant, and third party intermediary code of practice lead at Electralink, said:“Ofgem’s latest statement setting out their intended approach to address the lack of consumer protections in the non-domestic market makes welcome reading and further highlights the requirement for urgent action to ensure customer protections are consistent across the various sectors of the retail market.

“Electralink believes that the establishment of an independent code of practice for the non-domestic market is essential which is why we are driving forward the implementation of a code of practice backed by TPIs, suppliers and independent third parties.

“This is the first step towards improving standards and the overall experience of the customer and we will continue to engage with all parties to quickly create measurable protections for customers in the non-domestic market.”