Improvements for microbusinesses in the market begin to take effect

Before energy prices began to really soar, in March this year we saw the final package of reforms following the Microbusiness Strategic Review from Ofgem. The outcome of the review was to introduce changes to supplier licence conditions that would improve how microbusinesses are treated in the market. The new requirements aim to boost engagement and strengthen protections for microbusinesses through greater transparency over contract terms and complaint resolution.

As of 1 October, many of these licence modifications have now come into effect including strengthened requirements on the provision of principal contractual terms to ensure that they are clearly brought to the customer’s attention both pre- and post-contracting. Ofgem also decided that suppliers should ensure customers are provided with information around brokerage costs in the principal terms, to provide clarity around additional costs and ensure suitable purchasing decisions can be made by microbusinesses. There has also been a ban on suppliers requiring termination notices from microbusinesses if they wish to switch suppliers (excluding evergreen contracts), to enable a smoother switching process.

One key outcome of the Microbusiness Strategic Review that is yet to take effect is the requirement for suppliers to work only with brokers signed up to a qualifying Alternative Dispute Resolution (ADR) scheme. This means any broker disputes may be resolved through an independent body, in this case through Ombudsman Services. As of 3 November, the Ombudsman Services reported that, ahead of the requirement taking effect, there were over 1,400 Third-Party Intermediaries (TPIs) with a successful application, with more than 200 still undergoing the sign-up process.

Another part of the reforms is the publication of resources and advice that have been produced by Ofgem in collaboration with Citizens Advice. In its first guidance publication published on 12 October, it highlighted what microbusinesses need to know about the ADR scheme and how it works. This was followed by another guidance publication on 14 October, in which Ofgem outlined some broader points on TPIs and what microbusiness customers ought to know. The regulator advised on how TPI costs can be paid directly or indirectly and included a table of voluntary principles that it advises a TPI should follow.

Within the guidance, Ofgem also noted that it does not regulate or license TPIs, which serves as a reminder that the government has also been working in tandem on the issue. BEIS previously put out a call for evidence in August 2021 regarding potential regulation of TPI activity, having identified a number of potential risks for consumer harm. However, outside of the Microbusiness Strategic Review there has been little progress in finding the balance between the regulation of TPIs and becoming overly burdensome on a part of the market that works well for the majority of customers.  

While a difficult winter approaches for all, the changes introduced by Ofgem should have a beneficial effect in years to come by ensuring microbusiness consumers are not left behind in the market and are treated fairly by brokers and TPIs.

We keep track of all updates and developments to the supplier compliance landscape, similar to that included in today’s blog, for both domestic and non-domestic businesses through our Energy Supplier Compliance Portal. We’ve recently relaunched the service with a new and improved design, to help you find the information you need quickly and easily.

If you have any questions about our services or would like to sign up for a free two-week trial to see our new Compliance Portal, please get in touch through email with m.jennings@cornwall-insight.com. If you currently subscribe to the portal, we’ll be in touch shortly with your new login in details and to arrange a demonstration.

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