Ofgem sets out plan to tackle 'poor behaviour' by energy firms

Ofgem has asked the government to give it the direct power to regulate brokers and allow businesses to resolve disputes through a redress scheme.

It comes after a coalition of business groups, including UKHospitality, wrote to Ofgem calling for "immediate" action to stop hidden commission fees driving up bills.

Non-profit energy consultancy Box Power CIC, which organised the letter, said it had seen one case where a commission fee of £12,000 had been applied to a £49,000 energy contract for a care home.

Ofgem is also calling for businesses to be able to take complaints to the energy ombudsman and for better guidance over contract rates to avoid customers being overcharged.

It said it was working to adapt the Retail Energy Code to stop businesses facing excessive delays and unreasonable requests for documentation from suppliers during tenancy changes.

The regulator is also urging suppliers to be more flexible with businesses who signed up for peak fixed-rate energy prices.

Ofgem director Neil Lawrence said: "Suppliers are short-changing too many of their customers, who deserve better.

"Customers need more support when they are struggling and should be able to contact their supplier without frustration or undue delay when they need help.

"The plans we are announcing puts the welfare of business and domestic consumers first and sets out a comprehensive package to tackle poor behaviour by energy suppliers."

Ofgem aims to put its proposals into action "before the cold winter months return", Lawrence added.

Industry response

Sacha Lord, night-time economy advisor for Greater Manchester, said: "These proposals would be a major step forward in ensuring customers are given fair and proper protections against energy companies who have not been as transparent as they could have been.

"Every week we are being contacted by restaurants, pubs and bar owners up and down the country - the backbone of our hospitality sector - who simply cannot see a viable way forward."

UKHospitality said a recent survey of its members showed average energy costs were up 80% year-on-year and almost half of operators that signed a contract at the peak of the energy crisis last year feared their businesses was at risk of failure.

"Whilst it has been a long time coming, it is reassuring to see that Ofgem is now doing what it can to support the hospitality sector," said UKHospitality chief executive Kate Nicholls.

The Night Time Industries Association (NTIA) welcomed the proposals but said more needed to be done to stop suppliers charging "overzealous" security deposits and refusing to supply businesses.

"In particular, mentioning the hospitality or night time economy to energy suppliers or brokers at the point of engagement can lead to higher charges, sometimes up to 15% more than our retail counterparts pay, or even result in a complete inability to obtain energy supply," said Michael Kill, chief executive of the NTIA.

"This has created a considerable loss of confidence in the energy sector, as businesses feel that suppliers have taken advantage of the vulnerability of these sectors."

Ofgem is inviting feedback on its report by 6 September 2023 and will work with government to consult on any licence changes which arise as a result of the review.

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