New regulations to impact UK businesses and energy brokers

More regulations to protect non-domestic energy customers are on the way, thanks to some recent changes introduced by the Department for Energy Security and Net Zero (DESNZ) and the energy regulator Ofgem.

Under the Non-Domestic Market Review, the main targets are smaller businesses, who will now have their own defined customer category and will benefit from some of the same rights that microbusinesses are entitled to.

Energy brokers – or third-party intermediaries (TPIs) – are also to be impacted, with tighter regulations and mandatory accreditation being introduced for the current voluntary Code of Practice. Energy-related ‘Change of Tenancy’ processes are also under review.

New ‘Small Business Consumer’ classification

A new business category – the ‘Small Business Consumer’ – is being introduced to offer the same standards around complaint handling that currently exist for microbusiness customers.

Ofgem defines a Small Business Consumer as any organisation that:

• Consumes more than 100,000 kWh and up to 200,000 kWh of electricity annually; or
• Consumes more than 293,000 kWh and up to 500,000 kWh of gas annually; or
• Has fewer than 50 employees (or full-time equivalent) and has a turnover of less than £6.5 million or a balance sheet of less than £5 million

From December 2024, the intention is that these businesses will benefit from:

• Having any complaints against suppliers dealt with under the Complaint Handling Standards Regulations;
• Being able to refer any unresolved complaints against suppliers to the Energy Ombudsman;
• Having access to the TPI Redress Scheme in the event of any issues they may have with an energy broker;
• Being able to be get support from Citizens Advice (and their suppliers will be required to signpost customers to Citizens Advice)

Microbusinesses already qualify for these measures, and also will benefit from mandatory signposting to Citizens Advice by their supplier from July 2024.

According to DESNZ, the Microbusiness and new Small Business Consumer categories will together cover around 99% of the non-domestic market.

The introduction of these measures is contingent on secondary legislation being passed. But we don’t anticipate any issues with this following the General Election.

New measures for all businesses

Alongside the new measures for smaller businesses, from July 2024 the industry’s Standards of Conduct will apply to all customers (currently, they only apply to microbusinesses).

Furthermore, the TPI Commission Transparency requirement will be extended from Microbusinesses to all customers from October 2024.

This means that any consumer using an energy broker will have fully visibility of any commission-related uplift through their quote documents. This could be shown either as an uplift against the unit rate or the standing charge.

Code of Practice and accreditation for TPIs

A voluntary Code of Practice (CoP) for TPIs that was introduced last October is now set to become mandatory.

This CoP was created by the Retail Energy Code Company (RECCo), which is an Ofgem-created body to set up and oversee rules for operating in the retail energy sector, and it covers:

• Transparency and accuracy
• Transparent TPI pricing and product information
• Treating customers fairly
• Clear route for dispute resolution
• Appropriate data protection arrangements
• Awareness training to staff regarding the code and product information
• Appropriate compliance process
• Introduction of a minimum standard letter of authority (LOA) template

The RECCo is now planning to introduce a new mandatory accreditation process that would mean suppliers could only work with TPIs who adhere to the CoP.

Accreditation would be overseen by a new scheme administrator, with the actual accreditation process carried out by the administrator or suppliers.

In terms of timing, we are expecting a decision from Ofgem with final details in Q3 this year, with these measures then likely implemented in 2025/26.

Change of Tenancy process to be made easier

Also in focus for new regulations is the Change of Tenancy process, where businesses change supplier due to moving premises.

This area is fraught with inconsistencies across the market, with bad practice, failures and delays common. For example, new suppliers accepting a Change of Tenancy without relevant evidence, or an increase in transfers being blocked on ‘grounds of debt’.

As a result, Ofgem is exploring ways to regulate this process to make it clearer and more consistent.

We haven’t been given timings on this yet, but expect to hear something later this year, so will keep you updated.

If you have questions on any of the issues outlined, please contact your Client Lead or Account Manager.