- Quicker redress and compensation through the Energy Ombudsman
- Crackdown on energy brokers to stamp out exploitation
- Protections for businesses when installing smart meters
Families and small businesses are set to benefit from greater protections and consumer rights when things go wrong in the energy market.
Plans to strengthen the Energy Ombudsman will help customers resolve disputes with their suppliers, giving it further powers to stand up for consumer interests.
These include:
- Halving the waiting period from eight to four weeks before consumers’ complaints against their suppliers can be escalated to the Ombudsman;
- Giving customers quicker access to redress when their supplier lets them down; and
- Forcing suppliers to pay compensation if the Ombudsman’s rulings aren’t implemented quickly enough.
With almost ten per cent of consumer decisions handed down by the Ombudsman either implemented late or not enforced at all, the government has called time on the lengthy process leading to compensation.
The time the Ombudsman considers complaints would also be cut from an average of six to four weeks – helping consumers receive redress more quickly and easily when their supplier lets them down.
New measures will also stamp out exploitation when dealing with energy brokers and price comparison sites, collectively known as third-party intermediaries.
Until now, these have been unregulated – allowing rogue brokers to use predatory sales tactics to take advantage of customers, selling them overpriced contracts in return for higher commission fees.
Ofgem will be appointed to regulate this market and put an end to such exploitation, ensuring small businesses and public organisations are no longer taken advantage of and can save money on their bills through improved competition and lower commissions.
New plans will also standardise contracts when businesses and public sector firms are required to install smart meters, providing up to almost £200 million in energy savings.
Together, these actions will prohibit anti-consumer practices, improve consumer access to redress and take a substantial step towards an energy market that puts consumers first.
Energy Secretary Ed Miliband said:
For too long, parts of the energy market have been letting consumers down and not paying up when mistakes are made.
Our reforms will put this right – making it faster and easier for families and small businesses alike to benefit from money back when things go wrong.
We will also end the wild west of ‘cowboy’ brokers charging sky-high fees for contracts handed out to companies, while also providing better protections when installing a smart meter.
The reforms outlined in the consultation on the Energy Ombudsman build on measures announced earlier this year, setting out plans to expand automatic compensation to areas such as excessively long call waiting times, unexpectedly high bills when suppliers fail to adjust direct debits, suppliers not responding to complaints or not complying with Energy Ombudsman final decisions.
Small and medium-sized enterprises create 60% of private sector jobs and stand to benefit most from third-party intermediary regulation, as they are the most likely to be targeted by rogue brokers.
Once implemented, the new rules, monitored and enforced by Ofgem, will allow consumers to trust that brokers are acting in their best interests and improve access to redress and compensation if issues do occur.
This is alongside tough new obligations, proposed by Government and Ofgem in August, on energy suppliers to improve every stage of the smart meter process, including requirements to cut waiting times for installation appointments and fix meters that have stopped working in smart mode within 90 days – or provide consumers with automatic compensation.
Beth Martin, Director for Consumer Protection and Competition at Ofgem, said:
Energy brokers can help customers save money. But when any household or business is taken advantage of by a rogue energy broker, the reality is significant stress and financial strain that can have a real impact on their lives or the future of their company.
We have listened closely to the concerns of businesses and already introduced a series of changes to the support they are provided. By extending our remit to cover third-party intermediaries, we will significantly strengthen those protections, and the protections for households, so we can better protect all customers and create a more secure energy market – offering businesses and households greater peace of mind.
We look forward to working together with new and existing stakeholders to build an efficient, effective new framework.
Tina McKenzie, Policy Chair at the Federation of Small Businesses, said:
Tighter regulation of energy brokers is very much needed, so that small firms can be confident that they are getting the best possible deal, and so that honest brokers – who make up the majority – don’t have their reputation undermined by a small minority of dishonest operators.
Small businesses need to be sure they are getting a true picture of the energy market, full information about contracts, a stop to pressure-selling tactics, and a wide choice of tariff options along with straightforward and disinterested advice from their brokers. We look forward to working with the Government to make the energy marketplace safer and easier for small firms to navigate.
Ben Martin, policy manager at the British Chambers of Commerce, said:
Businesses are continuing to struggle with their energy bills, with 50% of firms telling us that they are a key source of pressure to raise their prices. Energy suppliers and regulators should be doing all they can to ensure that contracts offered to firms are fair.
The measures announced today can help deliver greater protections in the energy market, to ensure fairness for businesses across the UK.
Ramona, a cafe owner in the South West, said:
I’d just taken over a café and needed to set up a new energy contract as soon as possible, and a broker appeared at just the right time offering to help. After checking my usage, he gave me a monthly estimate of £500, which I thought sounded reasonable. But after a few months, I was being charged nearly £2,000 a month with no change in usage.
When I challenged it, I was told I’d been paying estimated bills, which made no sense because I had a smart meter. I’d only been offered one price from one supplier, which the broker claimed was the best available, and I signed the contract at a time when energy prices were likely to climb significantly, following the broker’s advice. It feels like I was given poor advice that served the broker’s interests, not mine.
When you’re a private person you have more rights, but when you’re a business you feel on your own because there’s nothing protecting you in the same way. The energy market feels like quite an unregulated place right now, so stronger protection would be welcome.
