Ofgem’s Non-Domestic Market Review was published in July, following two years of unprecedented volatility and a stakeholder engagement process.
Most busy business owners won’t have time to take in the entire 109-page review; so we’ve taken the liberty of covering the main points for you in this short digest.
The review was prompted by the impacts of the gas price crisis on business finances, which have left wholesale prices more than double their levels at the start of 2021. “Peak pricing” periods over the last two years have seen gas wholesale prices reach as high as quadruple their current point, which is still considerably higher than has been the norm for the last decade.
Ofem’s Non-Domestic Market Review Highlights
1 Suppliers overcharging out-of-contract businesses
Ofgem insists it is taking action against suppliers who are overcharging customers who are out-of-contract (OOC). This includes not correctly applying the government’s Energy Bill Relief Scheme discounts.
2 Security Deposits and fixed-price contracts
Ofgem has been notified that suppliers are asking a greater number of businesses for pre-supply security deposits and for increasing amounts. They intend to increase monitoring of this situation and promote best practice via their guide on security deposits.
They are also encouraging suppliers to work with businesses who are locked into peak pricing contracts to offer cost reduction solutions such as blend and extend products.
3 Change of Tenancy (CoT) and Change of Occupancy (CoO) documentation
When you are taking over a building from another business, you must complete a CoO or CoT in relation to its energy contract(s). This can be a time-consuming administrative process and can incur costs. Ofgem want to improve this process across the industry by providing standardised documentation through a consultation with stakeholders.
4 Customer complaints and standards of conduct
Customer service levels and complaints handling across the energy industry is falling short of Ofgem’s expectations. As a result, it is proposing to increase levels of reporting on complaint handling from suppliers and to widen microbusiness entitlements around service to more businesses.
Ofgem’s review found that businesses did not always understand what they were being charged, including “standing charges” and what commissions suppliers pass on to Third Party Intermediaries (TPIs).
Microbusinesses currently have all charges itemised in a certain format on their contracts, which Ofgem are proposing is widened to all business sizes.
6 TPI disputes
Ofgem requires suppliers to only work with TPIs who are signed up to the industry’s dispute resolution (ADR) scheme for microbusiness customers. Ofgem are proposing that this is widened to all business sizes.
7 Recommendation for regulation
Ofgem are proposing to government that they are allowed to regulate TPIs as well as suppliers.
8 Energy Ombudsman expansion
Ofgem are proposing that the government allows access to the Energy Ombudsman to businesses larger than microbusinesses, to which it is currently restricted.
9 Domestic consumers on non-domestic contracts
Sometimes, domestic consumers obtain their energy through a body such as social housing or a landlord. These consumers do not hold the relationship with the energy supplier, meaning they miss out on important protections. Ofgem is proposing to government that it can provide tailored advice to potentially vulnerable customers if they have disputes in this instance.
Procure Smart’s view
Procure Smart are supportive of Ofgem’s decision to review the non-domestic market and believe it should continue at intervals.
There is a lot more to consider within the sector than simply whether prices are too high. Oftentimes, we find businesses struggling simply to access energy contracts and have witnessed first-hand how difficult businesses of all sizes are finding energy costs in the UK’s weakened economic landscape.
Procure Smart agrees that poor service standards should always be challenged and Ofgem are right to raise this issue across the industry.
Equally, the entire UK energy industry is made less efficient due to a lack of uniformity of process across TPIs, suppliers, distribution/transmission operators and other bodies. Uniformity of processes and terminology, as Ofgem have suggested for CoTs and CoOs is, in theory, a positive step.
We believe that TPIs with robust working practices need not fear regulation. Indeed, the more forward-thinking TPIs have been working together over recent years to build self-governance. To the extent that Procure Smart has actually been sharing best practice on quality with competing TPIs during 2023.
We recently became a founding member of the Energy Consultants Association (ECA), which is looking to establish a code of practice across the industry. Procure Smart would urge Ofgem to engage with the ECA on this project to reach an appropriate outcome, having considered proper input from TPIs themselves, whose voices are so often not heard.