Ofgem energy market review calls for better business support

Energy regulator Ofgem has today (Wednesday 26 July) proposed a series of reforms to improve customer service standards for both businesses and households. 

Following extensive engagement with energy suppliers, businesses and consumers, Ofgem is announcing the publication of a series of reports, including:

  • A Non-Domestic Market Review findings and consultation – with many businesses struggling with energy market issues, the review will summarise the challenges they face and propose several actions for the sector, Ofgem and the government to address.
  • Minimum Capital Requirements for Supplier Finances – Ofgem wants all energy suppliers to be financially secure to ensure consumers benefit from a stable energy market. To that end, the regulator is today announcing a decision on the level of capital that suppliers are required to hold to ensure they are more resilient to severe but plausible market shocks. Ofgem is also proceeding with proposals to have the power to direct suppliers to ringfence a portion of their customer credit balances when it is deemed to be in the consumer interest. 

Ofgem's proposals would establish expectations to ensure all customers receive a consistent and acceptable level of service regardless of which company they are with. 

Some of the immediate changes Ofgem has taken include working with industry to adapt the Retail Energy Code to avoid excessive delays and unreasonable requests for documentation during tenancy changes, also urging suppliers to be more flexible with businesses that signed up for peak fixed rate prices. 

Review issues flagged

However, several issues have been flagged that require regulatory change, with Ofgem announcing it will consult on:

  • Introducing better complaint handling between suppliers and businesses
  • Extending micro business protections to all businesses so bulls spell out exactly what is being paid to energy brokers, also allowing businesses to settle disputes through a redress scheme
  • Creating better guidance over 'deemed contract rates' between customers who have not yet agreed contractual terms with a supplier to avoid issues such as overcharging.

Since the regulator's powers in the non-domestic market are more limited than in the domestic, it is asking the government to consider further protections in areas it can't effectively regulate – like energy brokers, for instance. Ofgem is also requesting for businesses to be given access to the energy ombudsman.

'Energy companies must be held to account'

UKHospitality chief executive Kate Nicholls comments: “Ofgem’s market review is extremely welcome, as energy continues to be a critical concern for hospitality businesses. It’s great to see that our ongoing campaigning has been acknowledged and that action is being taken to provide some much-needed support.

“By opening up new channels of communication, extended protections and more guidance, businesses across the industry can benefit from levels of support that simply have hitherto been lacking. 

“UKHospitality has continued to raise the reckless behaviour of some energy suppliers with government, with some offering rates well above wholesale prices, hiking standing charges, demanding eye-watering deposits, and, in some cases, refusing to work with hospitality companies. A recent member survey shows that energy costs are up 80% year-on-year and almost half of businesses who signed a contract at the peak of the energy crisis fearing their business is at risk of failure.  

“Whilst it has been a long time coming, it is reassuring to see that Ofgem is now doing what it can to support the hospitality sector.  

“Energy companies must be held to account, and we are committed to continuing to work with Ofgem and government to ensure the market is future-proofed. The recommendations in this review must be actioned urgently, as delays could lead to further business failures – of which there have been a significant number.”  

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