Energy regulator Ofgem has warned that it can now take direct action against ‘rogue’ brokers that missell energy to businesses, after being granted powers by Government.
Under the Business Protection from Misleading Marketing Regulations (BPMMR), Ofgem now has powers to clamp down on brokers and other organisations that are marketing energy products or services to business customers in a misleading way.
Brokers play an important role in helping businesses to compare the market. However, the latest Ofgem research found that around one third of Britain’s smallest businesses have a negative view of energy brokers.
Energy brokers’ fees can be recovered in various ways, for example they can form part of the rate businesses are charged for their energy tariff. However, Ofgem’s survey also found that around one third of businesses who had been approached by brokers did not consider that the broker had been upfront about the costs of their services. Previous Ofgem research has also shown that businesses are concerned about cold calling, high-pressure sales tactics and the unprofessional behaviour of some brokers.
Philip Cullum, Consumer Partner, Ofgem, said:
“It’s crucial for our economy that Britain’s small businesses get a fair deal in the energy market. Getting help from a broker can assist in keeping bills down, but business consumers need to feel confident that they know – and get – what they’re paying their broker for. Brokers could now face investigation by Ofgem if they fail to treat their business customers fairly.
“We’re pleased that Government recognised the value in Ofgem getting these powers, which should give better protection and confidence to businesses. This important addition to Ofgem’s regulatory toolkit complements the major changes we are making to the energy retail market for business and domestic consumers alike. The powers mean that Ofgem can investigate misleading marketing to businesses in the energy sector.”
If appropriate, Ofgem can seek undertakings from brokers and other organisations to stop misleading marketing activity or apply to court for an injunction to ensure that they are complying with the legislation.
Ofgem has also brought in a new set of rules to further protect businesses in the energy market. Since August 26th our new standards of conduct have been in force requiring suppliers to treat small businesses fairly on billing, contract issues and switching. These rules are backed by our powers to levy fines if necessary.
Ofgem has also updated existing rules meaning that 160,000 extra businesses now benefit from protections which stop suppliers automatically rolling over fixed term contracts for more than one year.
So that Britain’s smallest businesses are much clearer on when they should shop around to check they are on the best deal, Ofgem is requiring suppliers to put the contract end date on each bill from the end of March 2014.
Ofgem has also been developing an industry-wide code of practice for brokers that market energy to businesses. This code will set out that brokers have to behave in a fair and transparent way to give businesses confidence when using their services. Ofgem will publish the code for consultation in December 2013.