Views sought to protect SMEs from poor supplier behaviours

Ofgem is concerned there may be “insufficient market pressure” on energy suppliers to correct inappropriate behaviour towards some small business customers.

The regulator has outlined a series of issues it has identified in relation to the non-domestic energy supply market in a call for input which seeks views on whether regulatory changes are needed.

Protections were brought in last year for microbusiness customers, defined as businesses which consume 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 (c£1.53 million).

Yet Ofgem is now seeking views on whether to extend its definition of microbusinesses to include other non-domestic consumers, following evidence that they are subject to poor customer outcomes.

It said: “We have received representation that other groups, for example some small to medium enterprises (SMEs) who fall outside the microbusiness definition, also find it difficult to actively engage in the energy market and do not have the time or resources to deal with poor supplier behaviours through the courts.

“This may mean that there is insufficient market pressure to correct inappropriate supplier behaviours towards these groups of customers.”

In addition to extending the definition, Ofgem is seeking views on whether to put in place new rules for specific groups of customers. Additionally, the regulator wants views on the possible impact of such measures.

Elsewhere Ofgem raises concerns about the level of competition in the non-domestic supply market, with suppliers reducing their offerings in 2022 as the energy crisis took hold.

The regulator noted that some retailers focused on offering contracts to segments in the non-domestic market and reduced their portfolio in others, while a “rising number” of non-domestic customers could not pass credit checks.

“Overall, customers across the non-domestic sector reported struggling to find offers to contract,” Ofgem said.

It added: “We are concerned that there may be pockets of the non-domestic sector that do not have the level of meaningful competition that would help secure good outcomes.

“Less competitive pressure could allow the exercise of market power, either unilaterally or co-ordinately, lead to an overall drop in standards, and less innovation in the market – including fewer products that support customers to meet their net zero targets.”

Ofgem aims to publish its market findings and consult on proposed next steps in early summer.

If changes to licence conditions are needed, the regulator will publish a statutory consultation in the autumn, after considering responses to its summer consultation.

Any changes are expected to be implemented in winter 2023.