The recent consultation announced by Ofgem focusing on fixing some of the issues around energy brokers and deemed contract rates could potentially have a significant knock-on impact on energy retailers. These consultations aim to address longstanding issues impacting smaller business energy users, that haven’t up until now been captured in existing regulation.
One of the proposed changes is the extension of micro business protections to all businesses, meaning that energy contracts would have to clearly state the amount being paid to energy brokers. While this change is primarily aimed at preventing brokers from charging undisclosed commission levels, it will have an implication for retailers who will need to update their billing systems to accurately reflect the commissions being paid and ensure that they are providing transparent information to their customers. This adds another layer of complexity to the billing process, requiring retailers to ensure that their systems can handle these changes effectively.
Another area of concern addressed by Ofgem’s consultations is deemed contract rates – the rates charged by suppliers to customers who have no agreed contract terms – whether this is on new properties they’ve taken on or when they have fallen ‘out of contract’. Deemed rates are often significantly higher due to suppliers not being able to forward purchased the energy for a contract and can be punitive for smaller businesses. Ofgem is placing more focus on ensuring that businesses are applying the correct deemed rates, are not over-charging excessively and have retrospectively been applying the Energy Bill Relief Scheme (EBRS) to bills correctly. They are also placing greater emphasis on ensuring that Change of Tenancy processes (CoT) are being implemented correctly and that customers aren’t experiencing detriment by having CoT applications denied.
Ofgem has made clear that it expects energy suppliers to offer support to micro-business customers who may have contracted their supply contracts in times of peak pricing, and under the EBRS, and are now struggling to pay their prices after the EBRS has been withdrawn. Often these customers had little choice but to move onto much higher priced contracts and Ofgem has stated that it expects suppliers to work proactively with customers – either through renegotiating their contracts, reducing prices or spreading their prices over a longer time period, or giving customers longer to pay.
All of this new guidance will impact back-end systems and processes at energy retailers. Retailers also need to see how they can flag up issues with non-payment or issues with TPI’s at earlier stages. This could involve regular audits of billing practices and customer complaints management systems to ensure that any disputes are resolved promptly and fairly.
Retailers will need to adapt their billing systems and processes to comply with the proposed guidance, including incorporating transparent commission payment information, having flexibility to add additional tariff line to invoices and accurately calculating and invoicing deemed contract rates. While there may be costs and challenges associated with these changes, they also present an opportunity for retailers to enhance customer trust and differentiate themselves in the market. Suppliers should look to work with their billing system provider to ensure that changes can be implemented quickly, effectively and with minimum business disruption.