Energy procurement is a complex and delicate process for businesses, and with so many suppliers and tariffs to choose from, finding the best deal can be a daunting task. To make matters worse, the energy broker market has been infamous for its lack of transparency and trustworthy practices. However, thanks to the efforts of Ofgem, the UK energy regulator, the energy broker market is becoming fairer and more transparent. In this article, we’ll explore the measures that Ofgem has put in place to ensure that businesses receive a fair and competitive deal from energy brokers. With Ofgem’s regulations in place, businesses can have more trust in the energy broker market and maximise their energy savings.
How does the UK energy market work?
The UK energy market works by allowing businesses and micro businesses to choose their energy supplier and get a better energy deal. Energy brokers act as intermediaries between businesses and energy suppliers to help them find a fair contract. Ofgem, the energy regulator, ensures that the retail market regulatory framework covers third party intermediaries like energy brokers and provides protection from misleading marketing regulations.
Energy brokers play a crucial role in helping businesses shop around and get a better deal. They work with energy suppliers to negotiate energy contracts and earn a commission fee on the total contract cost. To protect businesses from unscrupulous energy brokers, Ofgem requires energy suppliers to ensure that the brokers they work with conduct themselves in a fair and transparent manner. Ofgem also requires suppliers to provide information about broker commission payments on contracts, clarifying and strengthening existing supply licence obligations.
For micro businesses, it is more important than ever to get a better deal, as they often have limited resources and are at risk of poor value deals. To help microbusinesses compare the market and find a fairer energy deal, Citizens Advice collaborates with Ofgem to create new and updated information. This allows micro businesses to access up-to-date guidance and advice alongside communications to help them find the best deal.
To ensure a more efficient energy system, Ofgem has introduced a requirement for suppliers to only work with brokers signed up to an alternative dispute resolution scheme. Ofgem has found that energy complaints have increased in recent years, highlighting the need for a fairer energy market. The regulator has also introduced measures to strengthen existing supply licence obligations to provide information about broker commission and to ensure suppliers maintain existing contract rates.
What powers does Ofgem have?
Ofgem, the energy regulator in Britain, has been given various powers to ensure that microbusinesses and other consumers get a fairer energy deal. One of its main roles is to regulate the energy market and work towards creating a fairer energy system for all.
To achieve this, Ofgem can require energy suppliers to provide information about broker commission payments on contracts, clarify and strengthen existing supply licence obligations, and introduce a requirement for suppliers to only work with brokers signed up to an alternative dispute resolution scheme.
In addition, Ofgem can ensure that the retail market regulatory framework covers third party intermediaries such as energy brokers and price comparison websites, and work collaboratively with Citizens Advice to create new and updated information to help micro businesses and other consumers access up-to-date guidance and advice alongside communications to find a better deal.
Furthermore, Ofgem has the power to take action against unscrupulous energy brokers who mislead micro businesses into signing up to poor value deals. It does so by requiring suppliers to ensure that the brokers they work with conduct themselves in a law-abiding way and by setting out commission fees and key contract details to make the total contract cost clear.
Overall, Ofgem’s powers are aimed at protecting business customers from misleading marketing, ensuring that the energy market works for everyone, and increasing awareness of how the market operates and their rights, particularly for the 5.6 million microbusinesses in Britain.
How does Ofgem affect energy bills?
Ofgem, the energy regulator in the UK, plays a crucial role in affecting energy bills for consumers. Ofgem regulates the energy market and sets price caps for energy suppliers, which in turn affects the amount that consumers pay for their gas and electricity.
One way that Ofgem affects energy bills is through the default tariff cap, which sets a limit on the maximum amount that suppliers can charge for standard variable tariffs. This cap is reviewed twice a year and is based on the cost of supplying energy to consumers, including wholesale energy prices, network costs, and policy costs. The aim of the default tariff cap is to protect consumers who are on standard variable tariffs from being overcharged by their energy supplier.
In addition to the default tariff cap, Ofgem also sets a prepayment meter cap, which limits the amount that suppliers can charge for energy for customers who pay in advance with a meter. This cap is also reviewed twice a year and aims to protect vulnerable customers who are more likely to use prepayment meters.
Ofgem also plays a role in promoting competition in the energy market, which can lead to lower energy bills for consumers. For example, Ofgem requires energy suppliers to provide customers with access to their cheapest tariffs, to make it easier for consumers to switch to a better deal.
Furthermore, Ofgem requires suppliers to provide customers with clear and transparent information about their energy bills, including the cost of energy, standing charges, and any additional charges or discounts. This information allows consumers to understand their energy usage and make informed decisions about which supplier to choose.
Recent ACS calls on Ofgem to make the energy broker market fairer for businesses
The Association of Convenience Stores (ACS) has called on Ofgem, the energy regulator, to take action to make the energy broker market fairer for businesses. The ACS represents over 33,500 local shops and convenience stores in the UK.
In a recent submission to Ofgem, the ACS highlighted concerns that some energy brokers are not transparent about their commission fees and the total contract cost, leading to small businesses being offered poor value deals. The ACS argues that this can have a significant impact on small businesses, particularly during difficult economic times.
The ACS is calling on Ofgem to introduce measures to ensure that energy brokers are transparent about their commission charges and key contract details. The organization also wants Ofgem to strengthen the existing supply licence obligations to provide information about broker commission payments on contracts.
The ACS is not the only organization calling for action on this issue. Citizens Advice has also highlighted concerns about the behaviour of some energy brokers, including misleading marketing practices.
In response to these concerns, Ofgem has already introduced a requirement for suppliers to ensure that the brokers they work with conduct themselves in a professional and ethical manner. Ofgem is also working with other organizations, including Citizens Advice, to create new and updated information to help businesses access up-to-date guidance and advice alongside communications from brokers and price comparison websites.