Switching Just got a Lot Easier for Small Businesses

Small business office

The energy market regulator has promised to clamp down on ‘unscrupulous’ energy brokers in order to protect small businesses, charities and care homes and make it easier to switch providers.

Proposals unveiled this week aim to prevent microbusinesses from being taken advantage of by unregulated energy brokers and paying over-the-odds for their energy tariff.

It is estimated that around two out of every three microbusiness customers enlist the services of an energy broker when choosing their gas and electricity supplier. However, an Ofgem review has found that rather than act in the best interest of their clients, many of these brokers offer poor value deals on behalf of major energy suppliers, as the client is not fully aware of what they are signing up. The review also found that a number of businesses were spending thousands of pounds on unnecessary commission charges and hidden fees.

Ofgem’s proposals for change include new responsibilities for energy providers to oversee that brokers conduct themselves appropriately and ensure the customer is fully informed about any key contract details and commission fees.

Furthermore, the new measures will also make it easier for microbusinesses to shop around and switch provider using a comparison service such as Selectra, with many of the administrative hurdles previously preventing this removed.

A better, fairer energy deal

Business energy bill and savings

Philippa Pickford, Ofgem’s Director of Future Retail Markets, Consumers & Markets said: “Providing greater transparency and tackling unscrupulous brokers will help microbusinesses get a better, fairer energy deal. This is more important than ever as microbusinesses emerge from the challenges posed by the Covid-19 pandemic.

“These proposals are part of Ofgem’s wider work to improve the energy retail market through smart metering, extra support for vulnerable customers, plus faster and more reliable switching”.

Among the proposals set out by the energy watchdog are:

  • Broker conduct principle: Introducing a principles-based requirement for suppliers to ensure brokers they work with conduct themselves appropriately.
  • Broker dispute resolution: A requirement for energy providers to only work with brokers signed up to a dispute resolution scheme.
  • Informed contract choices: Applying targeted sales and marketing rules to both suppliers and the brokers they work with.
  • Broker commission transparency: Clarifying and expanding existing obligations to provide information about broker commission payments on contracts, bills and account statements.
  • Cooling-off period: A 14 day cooling-off period from the date of signing amicrobusiness contract.
  • Contract extensions: Requiring suppliers to maintain existing contract rates for up to 30 days while a switch is being processed.
  • Banning notification requirements: Banning suppliers from requiring microbusinesses to provide notice of their intent to switch.
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