Navigating the Currents: Ofgem’s Approach to Regulation and Its Impact on Energy Brokers

Navigating the Currents: Ofgem’s Approach to Regulation and Its Impact on Energy Brokers

By -Published On: May 1, 2024-Categories: Business, Energy Consultants, Market Insight, News-

Last week, the FSB issued an open letter to Ofgem raising concerns about customers being overcharged for standing charges.

The ECA fully supports the concerns that the FSB have, and some of our members have been regularly engaging with Ofgem to highlight these concerns as well as new ones when the P432 directive comes into force (moving even more customers onto higher standing charge rates).

Ofgem’s Controversial Response

Ofgem’s response to the FSB was unacceptable.

Rather than respond directly to the FSBs concerns, they decided to deflect the issue and take a shot at brokers.

“We agree that too many businesses get (sic) ripped off by brokers”

This being the response issued, which was picked up and reported in mainstream media.

Setting the record straight

Misrepresentation of the Issue

The FSB letter raised no concerns about brokers, so to mention brokers wasn’t necessary or relevant in this context.

This comes only 8 months after Head of Non-domestic Retail Policy at Ofgem, Louise Van Rensburg said “brokers are worth their weight in gold.”

Questioning Ofgem’s Focus

Some might argue that Ofgem doesn’t conduct themselves in a manner expected of a regulator of one of the UK’s biggest industries.

And following media spin over the past 12 months, they appear to be becoming fixated on brokers, under the false impression that the sector is a major cause of distress.

Brokers’ Contributions to the Industry

It’s brokers that facilitate more than half of all non-domestic energy contracts.

It’s brokers that have helped UK businesses save billions of pounds by switching suppliers.

It’s brokers that have dramatically increased switching rates and lowered out of contract levels.

It’s brokers that are often responsible for protecting the interests of business customers, by ensuring that energy suppliers are held accountable when necessary.

Ofgem’s non-domestic policy unit is under-resourced with a skeleton of staff whose words and actions evidence that they don’t understand how brokers operate (a recent TPI forum illustrating that, when they assumed suppliers created the contracts not brokers).

Questionable Data Usage by Ofgem

Ofgem’s data on our sector appears to either be derived out of thin air, or alternatively it’s supplier sourced complaint data (clearly not impartial).

Both of which being unreliable, because they bear no resemblance to real complaint data recorded by both the Citizens Advice Bureau and the ADR scheme.

Statistical Evidence Against Ofgem’s Claims

The CAB registered 197 complaints about brokers over the entire period of 2020 to 2022.

In the past twelve months ADR involving brokers has seen less than 800 cases reported, a third of which were not upheld.

In recent years Ofgem have doled out hundreds of millions of pounds of fines to suppliers – but their opinion now appears to be that it’s the brokers “ripping people off.”

Ofgem’s Misdirected Focus

Despite the real evidence showing that broker activity results in a fraction of non-domestic complaints, with the broker sector recording lower complaint levels than pretty much any another broker industry (FCA, Insurance, Telecoms etc)

Ofgem persist in attacking brokers and devoting their stretched resource to focus on actions involving brokers, that have little to no impact.

Conclusion: A Call for Change in Focus

Our members, like energy suppliers and Ofgem are here to serve customers – it’s the customer’s needs that come first and as and industry we should all be focussing on how we can help non-domestic customers reduce energy costs.

Ofgem have a multitude of areas to focus on that could affect real change and reduced cost – scrapping P432 and MHHS, improving COT processing, kerbing excessive deemed rates, revoking the licences of suppliers that repeatedly breach their licence conditions and standing charge rates.

Yet they don’t.

Final Thoughts

For more than two decades OFGEM has focused almost exclusively on the domestic market.

This MUST change.

OFGEM’s non-domestic team desperately needs investment and resource, and a leadership team that is willing to devote the time it will take to properly understanding the non-domestic space and how brokers and suppliers really operate.

They need to regain trust from brokers, consumers, and suppliers first before taking cheap shots at others.

The comments made last week were unnecessary.

We hope Ofgem will do the right thing and apologise to all those brokers – the ones who are worth their weight in gold.

Join The ECA

If you’re a broker or consultant in the energy industry, consider joining the Energy Consultants Association (ECA) today to stay informed, receive valuable resources, and contribute to the collective voice shaping the future of our industry.

At The ECA, we advocate for transparency and diligence in the energy industry.

Join us today and benefit from industry intelligence, networking opportunities, and a powerful collective voice.

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