In the fast-evolving landscape of the energy consultancy industry, staying informed and actively participating in discussions about regulatory reforms is paramount.
The Energy Consultants Association (ECA) recently had the opportunity to engage with Ofgem, the UK’s energy regulator, to discuss a range of crucial topics.
Here, we provide insights into the meeting and our perspectives on some of the key points discussed.
Ofgem’s Appreciation for Energy Brokers: Worth Their Weight in Gold:
One notable highlight from the meeting was Ofgem’s recognition of the pivotal role played by energy brokers.
Louise van Rensburg, Head of Non-domestic Retail Policy at Ofgem acknowledged that “Energy brokers are worth their weight in gold”.
Officially underscoring the value brokers bring to the energy market.
It’s a testament to the contributions of energy brokers in helping businesses navigate the complexities of energy procurement, saving them time and money.
Concerns Around Proposed Reforms:
While the meeting held positive moments, there were concerns raised regarding proposed reforms.
Specifically, reforms related to fee disclosure introduced in 2022 were discussed. Some attendees voiced concerns that these reforms could potentially be seen as anti-competitive.
In response to these concerns, Ofgem was urged to provide legal guidance to address any apprehensions within the industry.
The Need for Proper Assessment:
Members at the meeting consistently raised a crucial point.
They emphasised that the two reforms under debate, namely the expansion of Alternative Dispute Resolution (ADR) and fee disclosure, lacked proper assessment.
Chris Shaw, our interim chair, expressed surprise that Ofgem “had not undertaken a thorough assessment following the three-stage Cost-Benefit Analysis (CBA) process.”
This process involves determining the economic cost of the problem, calculating the cost of the proposed changes, considering unintended consequences, and providing a final calculation of the benefit to consumers.
John Haw, Vice Interim Chair of the ECA, added to this sentiment.
He pointed out that there “had been no evidence to support allegations that broker abuse was widespread.”
He requested Ofgem to publicise the data supporting these allegations.
Competition Law Considerations:
Ofgem was reminded of the serious implications of any licence condition changes being perceived as anti-competitive.
Ensuring a level playing field and fair competition within the energy market is of utmost importance.
ADR Under Scrutiny:
The quality of decisions and the lack of a proper appeal process in ADR came under scrutiny during the meeting.
The ECA suggested that Ofgem should conduct a three-stage assessment to determine the scheme’s costs versus the actual benefits.
It’s worth noting that the costs of the entire scheme get passed back to the end consumers.
To discourage frivolous complaints, the suggestion of implementing a mandatory application fee of £75 by the consumer was put forward.
This would deter customers from making uncredible complaints, knowing that economically, it would be more viable for a broker to pay a smaller fee than incur £350 ADR fees (which cannot be recovered under the ADR scheme).
Review of Fee Disclosure License Conditions:
Concerns were raised about Ofgem’s licence conditions related to fee disclosure. With suggestions that they might be misinterpreted by suppliers due to unclear guidance from Ofgem.
Ofgem agreed to review these conditions in response to members’ requests for clarification.
Additionally, concerns about fee disclosure being anti-competitive and creating an uneven playing field, were raised by John Haw, ECA’s interim Vice Chair.
Communication and Publicity of Reforms:
Questions were raised about whether Ofgem had done enough to publicise the proposed reforms.
Approximately 2% of brokers attended the session, with many reporting that they were unaware of it due to a lack of direct communications from Ofgem; word of mouth being the primary source of information.
Neither the ECA nor many of our members received formal invitations to attend.
The ECA suggested direct engagement with Ofgem, a proposal that Ofgem welcomed. A follow-up session has since been organised for all brokers and consultants to attend:
Date: September 26th
Time: 10:30 am – 12:00 pm
Engaging with regulatory authorities like Ofgem is crucial for the ECA and its members to actively contribute to discussions that shape the future of the energy consultancy industry.
While the meeting addressed various concerns and viewpoints, it remains important to ensure that proposed reforms are thoroughly assessed, transparent, and in the best interests of both businesses and consumers.
We look forward to continued engagement with Ofgem and other stakeholders to foster a vibrant and competitive energy consultancy market in the UK.
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