New rules for suppliers and brokers to protect businesses from misselling

Publication date
13th February 2014
Information types
Policy areas
  • Ofgem is proposing a new code of practice requiring brokers and other third party intermediaries (TPIs) to be completely clear with businesses about their fees, the contracts they offer and which suppliers they represent.
  • Ofgem proposals require suppliers to only work with brokers that have signed up to the code
  • The finalised code and licence condition should be in place by the end of the year.

Suppliers are to be set new rules which will further protect businesses from misselling by some energy brokers.

The new rules Ofgem is proposing mean that if suppliers want to market deals through a broker, or a TPI they would have to use one which is accredited under a new code of practice.

TPIs play an important role in helping businesses compare and choose tariffs and make their energy decisions. However, some do not operate fairly and mislead businesses.

Ofgem has already put in place rules to give businesses better protection and more clarity on their options when their contracts come to an end. And since November 2013, we have had powers to act against TPIs that are marketing energy products or services to businesses in a misleading way.

To further increase protection, Ofgem and stakeholders have developed an industry-wide code of practice for TPIs to follow so that they treat businesses fairly when advising them on the best deals. Once finalised it will require TPIs to be completely transparent about the fees for their services, the suppliers they are affiliated with, and the contracts they offer. And if suppliers want to market deals through a broker they will have to choose one which complies with the code. The code and regulation for suppliers should be in place by the end of the year.

Maxine Frerk, Partner for Retail Markets at Ofgem said:

“We are determined to clamp down on poor practices by some TPIs and provide more transparency in this market. They also have to improve their overall training and the way they deal with customers. We have already obtained from Government, powers to take enforcement action against misleading TPI behaviour. The next step is finalising the industry-wide code practice for TPIs. By requiring suppliers to only work with accredited TPIs, we will ensure that suppliers and TPIs are jointly accountable for giving a high quality service to business consumers.”

Ofgem has also reviewed suppliers’ use of automatic rollovers of fixed term contracts for businesses. Under our proposals, small businesses will only need to give a maximum of 30 days’ notice that they want to switch suppliers at the end of their contract. Currently notice periods range from 30-90 days. Streamlining this across suppliers will end confusion for businesses on when they have tell their supplier if they want to switch at the end of the contract.  

At the end of the contract suppliers will also have to provide businesses with information on how much energy they have used in the last year and provide a comparison between their current rate and new rates they are offering. This will make it easier for businesses to compare other offers. Suppliers will also have to acknowledge in writing any request that a business makes to switch at the end of their contract. All these changes relating to rollover contracts should be in place by the end of this year.

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Notes to Editors

1. In November 2013, Ofgem was granted powers by Government to clamp down on brokers and other organisations that are marketing energy products or services to business customers in a misleading way.

2. More information about Ofgem’s retail market reforms for businesses is available on our website.

3. Information on Ofgem’s development of the draft code of practice for TPIs is available on our website.  We published the consultation today which ends on 9 May 2014.

4. As well as tackling misselling, the proposed code covers sales, information provision, complaints handling and training requirements for staff that work for TPIs. This code would be governed by an independent board comprising suppliers, TPIs and consumer groups with oversight from Ofgem. This independent industry body would have powers to expel a TPI if it wasn’t complying with the code.

5. All the Big Six suppliers now no longer roll their customers onto fixed term contracts with termination penalties. The Big Six supply around 90% of electricity and around 80% of gas to Britain’s smallest businesses. However, rollover contracts do help smaller suppliers as they give them more certainty about how much energy they need to buy for their customers over a longer period. This helps them compete more effectively against the Big Six suppliers. Our proposals for a code of practice for TPIs and more protection for business on auto rollover contracts will help businesses have more confidence when engaging in the market. The consultation on these proposals ends on 11 April 2014.    

6. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

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Chris Lock: 020 7901 7225
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