Greater protections when things go wrong in the energy market for consumers and small businesses have been proposed by the government.
A new consultation includes plans to strengthen the Energy Ombudsman to help customers resolve disputes with suppliers, new regulation by Ofgem to stamp out “exploitation” when dealing with energy brokers and price comparison sites, and standardising contracts when businesses and public sector firms are required to install smart meters.
Third-party intermediaries are currently unregulated and the government says this has allowed “rogue brokers to use predatory sales tactics to take advantage of customers, selling them overpriced contracts in return for higher commission fees”.
Small business owners are often targeted.
Ramona, a cafe owner in the South West, said: “I’d just taken over a café and needed to set up a new energy contract as soon as possible, and a broker appeared at just the right time offering to help. After checking my usage, he gave me a monthly estimate of £500, which I thought sounded reasonable. But after a few months, I was being charged nearly £2,000 a month with no change in usage.
“When I challenged it, I was told I’d been paying estimated bills, which made no sense because I had a smart meter. I’d only been offered one price from one supplier, which the broker claimed was the best available, and I signed the contract at a time when energy prices were likely to climb significantly, following the broker’s advice. It feels like I was given poor advice that served the broker’s interests, not mine.
“When you’re a private person you have more rights, but when you’re a business you feel on your own because there’s nothing protecting you in the same way. The energy market feels like quite an unregulated place right now, so stronger protection would be welcome.”
The plans to strengthen the powers of the Energy Ombudsman include:
- halving the waiting period from eight to four weeks before consumers’ complaints against their suppliers can be escalated to the Ombudsman
- giving customers quicker access to redress when their supplier lets them down
- forcing suppliers to pay compensation if the Ombudsman’s rulings aren’t implemented quickly enough
Energy secretary Ed Miliband said:
“For too long, parts of the energy market have been letting consumers down and not paying up when mistakes are made.
“Our reforms will put this right – making it faster and easier for families and small businesses alike to benefit from money back when things go wrong.
“We will also end the wild west of ‘cowboy’ brokers charging sky-high fees for contracts handed out to companies, while also providing better protections when installing a smart meter.”
Beth Martin, director for consumer protection and competition at Ofgem, said:
“Energy brokers can help customers save money. But when any household or business is taken advantage of by a rogue energy broker, the reality is significant stress and financial strain that can have a real impact on their lives or the future of their company.
“We have listened closely to the concerns of businesses and already introduced a series of changes to the support they are provided. By extending our remit to cover third-party intermediaries, we will significantly strengthen those protections, and the protections for households, so we can better protect all customers and create a more secure energy market – offering businesses and households greater peace of mind.
“We look forward to working together with new and existing stakeholders to build an efficient, effective new framework.”