Small businesses have dealt with dishonest energy brokers for far too long.
We welcome the news that energy regulator Ofgem wants stronger powers to protect the country’s smallest businesses from overzealous energy brokers. It’s just a shame it’s taken so long for this problem to be tackled.
Over two thirds of small businesses buy electricity and gas from a broker, who acts as an intermediary between suppliers and customers. Good brokers should, in theory, engage with the small business by informing them of the best deals and tariffs on the market — but this doesn’t always happen.
In its recent response to the government’s Consumer Green Paper, Ofgem said:
“Our evidence suggests that some businesses that engage with intermediaries may be misled or left unsatisfied with their treatment. Strengthening our powers to enforce consumer protection law that applies to the non-domestic market, particularly for smaller businesses, would improve our ability to tackle misconduct by intermediaries. We would like to explore this with government.”
In search of honest brokers
When energy suppliers sell to households, Ofgem makes sure they meet strict standards. They must be transparent about who they work for and give accurate price comparisons. Suppliers have received big fines for breaking these rules.
It’s clear that small businesses need similar protections. We give advice to small businesses through our consumer service helpline and Extra Help Unit. Our advisers have helped with cases where brokers have used sharp practice, even outright fraud, to win contracts. The financial impact on businesses who’ve been mis-sold can be severe — at its worst, it can tip a profitable business into the red.
Last year, we published a list of the most common problems with brokers that small businesses contacted us about.
The list includes aggressive sales, lack of transparency, misrepresentation and mis-selling. More specific examples include brokers claiming to be from an official body, claiming a new product is necessary and hiding commercial relationships with specific energy suppliers. There’s no obligation to record the conversation between a broker and a business that leads to a sale, which means complaints are very difficult to prove. Instead, these businesses rely on the good will of their energy supplier to end their contract.
This lack of protection has dire consequences not just for individual businesses but for the market as a whole.
There’s evidence of an engagement gap in the sector and we think some of this is down to the behaviour of brokers. The good ones are good, but if you’ve had a bad experience in the past, you might not be willing to use a broker again. This is bad for the market and for consumers because there won’t be the same pressure to keep prices down.
What can be done?
To combat this, there needs to be regulation of energy brokers. We’ve been calling for this since 2004, but it’s still the case that business owners can’t rely on the same basic protections in their business premises as they can in their homes.
At Citizens Advice, we believe the right response is a mandatory code of practice. This code should reflect the 6 voluntary principles we developed with Ofgem to encourage good practice among brokers. These clearly outline to the energy industry clear expectations of how we expected energy brokers to behave.
Energy brokers play an important part in the energy industry. Trusted advice, given with the above 6 principles in mind, has a crucial role in building the confidence of our country’s smallest businesses to engage with energy. This has never been so important — businesses have opportunities to benefit from great deals, new generation smart meters and cost-saving energy efficiency measures. But all of these opportunities are at risk while unaccountable brokers hassle and mislead businesses.