Third Party Intermediaries: what your microbusiness needs to know

Guidance

Publication date

Industry sector

Supply and Retail Market

A non-domestic consumer is defined as a microbusiness if they:

  • employ fewer than 10 employees (or their full time equivalent) and has an annual turnover or balance sheet no greater than €2 million; or
  • use no more than 100,000 kWh of electricity per year; or
  • use no more than 293,000 kWh of gas per year.

Your business will qualify as a micro-business for both gas and electricity if it meets the employee and turnover or balance sheet criteria. If it doesn’t meet those criteria but your business uses no more than the defined usage for either gas or electricity, it does qualify as a microbusiness for that fuel.  If it uses no more than the defined usage for both fuels, it qualifies as a microbusiness for both gas and electricity.

Your business will qualify as a micro-business for both gas and electricity if it meets the employee and turnover or balance sheet criteria. If it doesn’t meet those criteria but your business uses no more than the defined usage for either gas or electricity, it does qualify as a microbusiness for that fuel.  If it uses no more than the defined usage for both fuels, it qualifies as a microbusiness for both gas and electricity.

When we refer to Third party intermediaries (TPIs) we are referring to organisations or individuals that give energy-related advice, aimed at helping you to buy energy and/or manage your energy needs. TPIs include switching sites, energy brokers and any company that offers support with energy procurement. Whether you approach a TPI directly or they contact you, you should not feel under pressure to use their services. Your energy supply contract will always be with an energy supplier: the TPI does not supply your energy.

A TPI can support you when getting a business energy quotation as the process is different from getting a quotation for your home.

  • There are very few published prices in the business market and you need to contact suppliers to obtain a quotation. 
  • There is no obligation for a supplier to supply you – a supplier may determine which customers they choose to supply by factors such as size of supply or your credit rating. 
  • There is no cooling-off period after you agree the contract (even when this agreement is made over the telephone rather than in writing). 
  • An agreed contract may last for multiple years and may have an early termination fee if you wish to change supplier before then.

Important questions to ask a TPI before you consider using their services:

  • Which suppliers will you be approaching to get prices? 
  • How many price offers will you give me? 
  • What will you do to help me switch supplier? 
  • What services will you provide during the life of the contract? 
  • How will I be charged for these services? Will I be charged directly or indirectly?

Paying for a TPI’s services

A TPI will charge for the services it provides you. This could be a direct charge paid by you to them (eg a flat fee, a charge per trade made on your behalf) or indirectly. For indirect payments, the TPI receives a payment from the supplier, which is added to your bill.

Suppliers and brokers must ensure that consumers are fully informed about the nature and costs associated with a contract they are being offered.  From 1 October 2022 information on TPI costs that will be included in the bill the supplier sends you must be provided to microbusinesses via the Principal Terms, in written form for all contracts. This information must be presented as a total cost in pounds/pence covering the duration of the contract, this is as described in SLC 7A.10C.2. The principal terms should be disclosed before the microbusiness enters into a contract with the supplier and again within 10 days or entering into the contract.

As the commission fees are based upon consumption figures, in the event that a customer consumes more energy than was estimated they will be liable for paying for their actual consumption. Customers, suppliers and brokers should ensure estimates are as accurate as possible to ensure estimated costs are reflective of actual costs

If a broker/TPI is paid directly by the microbusiness rather than via third party costs added to a customer’s bill by the supplier, they do not need to be declared in the principal terms provided by the supplier.

Please note that suppliers internal sales teams do not have to disclose commissions fees. This is because brokers perform a different service to a supplier and offer a range of services to the consumer for which customers are paying. A consumer would expect that a supplier’s charges would be a total of all their costs, including that of any sales staff. However, our research has shown that it is not always clear to a consumer that the prices they are quoted include broker commissions, and what portion of the prices they are quoted goes to the broker, and what are for the supply of energy. Hence the need to clarify the split of payments in the principal terms.

We have been alerted that scammers are claiming that Ofgem has made energy brokers repay the cost of undisclosed broker / TPI commissions paid on previous bills.

Ofgem do not regulate energy brokers and, as such, have no legal power to require energy brokers to repay commissions.

You may be able to claim back the cost of previous undisclosed broker / TPI commissions through litigation. Please ensure that you seek independent legal advice.

Consumer Protection

TPIs must comply with consumer protection laws, including those which relate to business customers. For example, a TPI is prohibited by the Business Protection from Misleading Marketing Regulations (BPMMRs) from carrying out misleading advertising activities and should therefore always identify themself and be clear about the purpose of their call. In November 2013, Ofgem acquired powers to apply to courts for an injunction to prevent breaches of the BPMMRs. 

In instances where breaches of the BPMMRs may be criminal offences (which can be enforced by Trading Standards and The CMA) Ofgem may notify these enforcers of concerns, where appropriate. Ofgem does not license TPIs but has set out voluntary principles showing how they should operate, below.

Ofgem does not license TPIs but has set out voluntary principles showing how they should operate, below:

Principle Example of TPI behaviour
A. Honesty  You should identify yourself, the services being offered and any organisations you represent (directly and indirectly) clearly at the start of any interaction with a customer and obtain their consent before any marketing 
B. Respect You must at all times respect the consumer’s wishes and should cease the current contact and avoid future contact if the customer requests 
C. Accuracy You should make the customer aware of how much of the market you searched to obtain the offers you propose to them and ensure all offers are accurately presented
D. Transparency Before obtaining their agreement to the contract, you should make the customer aware of all principal terms of the energy contract, including the services you provide and how the customer will pay (directly or indirectly) for those services
E. Customer-focused You should record and investigate all complaints fully and act quickly to put things right when you make a mistake
F. Professionalism You should ensure staff are adequately trained for dealing with customers and adhere to these principles

 

Frequently Asked Questions

Advice and support

What to do if you are not satisfied with a TPI

In the first instance you should contact your TPI and attempt to resolve the issue with them. If you find you are unable to reach a solution from the 1 December 2022 you can take your complaint to an Alternative Dispute Resolution (ADR) Scheme when:

  1. you have reached a “deadlock” position, where the parties involved aren’t able to agree a resolution and have reached the end of the complaint process; or 
  2. 8 weeks have passed without an agreement being made

Currently the Ombudsman Services is the sole provider but other providers may emerge in the future.

Taking your complaint to an ADR scheme is free of charge for a microbusiness.

Useful contacts

Microbusiness customers can also get help and advice from Citizens Advice free of charge.

  • Citizens Advice Consumer Helpline: 0808 223 1133
  • To contact a Welsh speaking advisor: 0808 223 1144
  • For textphone, dial 18001 followed by the helpline number
  • Or use the online webchat 9am-5pm.

For public enquiries contact: