Ofgem Non-Domestic Market Review Summary
Ofgem's non-domestic review
In February this year, Ofgem (Office of Gas and Electricity Markets - the independent energy regulator for Great Britain) released a 'Call for Input' which invited stakeholders to provide their views on the state of the non-domestic retail energy market. This was in response to their concerns of consumer harm in this market. The findings of the Call for Input have just been published in Ofgem's non-domestic market review which comes at a pivotal time following two years of unprecedented volatility in wholesale gas and electricity prices, along with wider economic pressures.
Andrew Jones, Regulation Manager here at TotalEnergies, summarises some of the key areas of the review, the suggest policy measures and what they mean for customers.
What's already happening?
"Ofgem already put in place changes to protect customers on deemed or out of contract rates during the EBRS/EBDS government support with the introduction of the QFDC (Qualifying Financially Disadvantaged Customers) discount scheme. This was a temporary measure, and Ofgem have now recommended a permanent change with new guidance in place to ensure deemed or out of contract rates aren't disproportionately higher than contract rates.
They've also recommended, via industry riles, a standardisation to the CoT/CoO (change of tenancy/occupancy) processes. This is positive news for customers as it will add structure and conformity to this process across suppliers. We're expecting this to come into play with a change in regulation this winter once a draft of the new rules have been published, and we will continue to work with Ofgem to implement this.
There are a number of changes which have been proposed in the review, below are some which are key:
- Of gem are going to ask for powers from government to directly regulate TPI's, not just via supplier obligations in licenses or the REC code
- Mandate transparency of TPI (Third Party Intermediaries) commissions to all customers, not just micro-business
- Proposing new guidelines on best practice for deemed tariffs
- Asking government to expand the scope of the Ombudsman Services from domestic and micro-business customers to all customers
- Create regulations to require suppliers to give timely responses to complaints and stepped-up reporting to Ofgem on complaint handling
- Ofgem are to expand the ADR (Alternative Dispute Resolution) scheme to apply to all customer types and not just micro-businesses. This scheme refers to ways of resolving disputed between consumers and traders that don't involve legal avenues.
A proportionate response?
Given the impact of the energy crisis and the scrutiny faced over the last two years, this is definitely the right time for Ofgem to look at how the market performed, what the underlying issues are, and we are very much in support of this.
There were some concerns that the suggested measures would be a reaction to the volatility we've seen over the last two years, however I don't think that's the case. The response from Ofgem has been proportionate, focusing on the long-term health of the market and ultimately ensuring customers are provided with the service they deserve.
Recommendations to government
The non-domestic market review is extensive and while we are supportive of changes that are of benefit to customers, we are questioning the assumption for some of the proposed actions that large industrial and commercial customers are similar to microbusinesses and this should be awarded the same protections. In the recommendations to government, for example, Ofgem have called for: expanding access to the Energy Ombudsman to all customers.
These customers are not the same as microbusinesses, they operate differently with vastly different resources, and I worry by offering access to the ombudsman this will create issues with the complexity of contracts and potentially add limitations to a valuable and necessary resource for microbusiness customers to tap into.
There's a lot to digest here with the review and the next step is for Ofgem to have a statutory consultation in the autumn and based on this, most regulatory changes could then be in place by the end of the year."
For more information on Ofgem and to access the non-domestic market review, please click here.