By Daniel Hunter
Energy regulator Ofgem has set out why it needs more powers from Government to tackle mis-selling of energy deals to businesses. This is part of Ofgem's wider action to protect small business customers.
Ofgem is seeking powers to enforce the Business Protection from Misleading Marketing Regulations (BPMMRs). This would allow Ofgem to take direct action against 'rogue' brokers that mis-sell energy to businesses.
It would add to the new package of tougher rules Ofgem has proposed for how suppliers should treat their business customers, following its investigation of the retail market. The regulator is also developing a code of practice for brokers so businesses can have greater confidence when using their services.
Brokers can play an important role in helping businesses to compare the market and Ofgem research shows that this is recognised by businesses as well. However Citizens Advice reports that 42 per cent of complaints it received from small businesses about misselling between November 2011 and October 2012 contained references to broker behaviour.
Ofgem‟s research has found that between 14 and 17 per cent of businesses that used brokers when looking to switch were dissatisfied with them. Businesses were particularly concerned about cold calling, high-pressure sales tactics and the unprofessional behaviour of some brokers.
Ofgem is also reviewing suppliers' use of automatic rollover contracts for the smallest businesses. Our existing rules already limit rollover contracts for these firms to one year. We will be investigating the impact this has on smaller businesses and considering if changes are needed to the Ofgem supply licence conditions, including whether we should ban rollovers.
As a result of Ofgem putting pressure on suppliers to cut back-billing, eight have responded by agreeing to limit it for small businesses to one year, from no later than 2014. Other suppliers have yet to follow suit so the regulator is calling for them to make similar pledges.
“Small businesses are an engine of growth in our economy and it is crucial that they get a fair deal in the energy market," Philip Cullum, Consumer Partner, Ofgem, said.
"Many brokers play an important role in helping firms compare the market. However we want powers to take action against intermediaries that mis-sell, so businesses can have more confidence when using brokers. This move sits alongside other measures we have proposed, including enforceable standards of conduct for how suppliers should treat businesses and developing a Code of Practice for brokers. We are also scrutinising the use by suppliers of rollover contracts for businesses.
“We are pleased that some companies have already responded to our call for action by cutting back-billing for small businesses, but we want all suppliers to follow their lead, with a limit of 12 months in place as soon as possible next year.”
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