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New Ofgem rules to offer greater protection for businesses

960 640 Stuart O'Brien

Businesses will get fairer treatment, more support resolving disputes and greater transparency on broker fees under new rules announced by Ofgem, the regulator says.

The changes will apply to the non-domestic energy sector, which includes businesses, public services like sports centres and village halls, utilities, charities and more.

The new rules will make sure energy suppliers improve customer service, open doors to alternative dispute resolution schemes and clearly set out costs for businesses, including fees paid for third party services, like energy brokers.

Under the changes, Ofgem will from 1 July 2024:

  • Expand the Standards of Conduct to apply to all businesses of any size, rather than just Micro Business consumers. This will give Ofgem powers to take action against suppliers that do not treat non-domestic customers fairly.
  • Introduce a new supply licence rule for non-domestic suppliers which requires them to signpost Micro Business consumers to Citizens Advice and Citizens Advice Scotland, who can offer support and advice when they have an issue. This will also apply to Small Business consumers from December 2024, subject to the new definition entering legislation.

Further changes, that Ofgem expects to be in place by the end of the year, include:

  • Expanding the requirement for a contract’s principal terms to clearly display any broker fees from Micro Business consumers to all non-domestic customers. This will apply to contracts signed on and from 1 October 2024 and suppliers must make this information available upon request.

From December 2024, in line with the government’s proposed new Small Business consumer definition entering legislation, Ofgem will also:

  • Update the Complaints Handling Standards to ensure suppliers put in place suitable complaints processes for Small Business consumers and point them to the Energy Ombudsman when a customer does not feel the issue has been resolved.
  • Implement a requirement for suppliers to only work with Third-party Intermediaries (TPIs), often referred to as brokers, that are members of a redress scheme when securing Small Business contracts. This will provide reassurance to business customers that they are able to access dispute resolution schemes and get a fair and suitable outcome.

Tim Jarvis, Ofgem’s Director General for Markets, said: “Too many businesses have experienced issues with some energy suppliers, from difficulty getting the right contracts, unexplained price hikes, and poor customer service.

“We’ve worked hard to understand the breadth of issues and where the powers we have to tackle them can be improved. These new rules will help ensure businesses get the service they deserve.

“We’ll be speaking to businesses of all sizes as these rules come into force throughout this year to make sure they are being followed by suppliers. We’ll also continue to work with government, industry, and consumer groups to see what else can be done to support non-domestic consumers.”

Ofgem’s new rules come as the government confirms plans to expand its definition of Small Businesses, meaning businesses with less than 50 employees and a certain turnover or using a certain amount of energy can take complaints about their energy supplier to the Energy Ombudsman.

Under new Ofgem rules, Small Businesses will also be able to resolve disputes about third parties like energy brokers with redress scheme providers, such as the Energy Ombudsman and the Utilities Intermediaries Association (UIA). This was previously only available for Micro Business consumers so the change will give more businesses access to independent support with complaints.

The changes being brought in by Ofgem to help businesses result from concerns shared last year about problems including poor customer service and complaint handling from those in the non-domestic energy market. This prompted a joint deep dive to learn more about these issues with the Department for Energy Security and Net Zero (DESNZ), the full results of which have now been published.

More than half of those taking part in the research (58%) said they were concerned about the impact of energy prices on their business, with 42% reporting they were very concerned. And almost two thirds (60%) of businesses were satisfied with the overall service they had received from their supplier, with 13% saying that they were dissatisfied.

The main reasons consumers said they were dissatisfied included the service being too expensive, poor customer service, and poor communication from their supplier.

Photo by krakenimages on Unsplash

Energy M&A activity hit $158bn in 2018

960 640 Stuart O'Brien

Transaction volumes within the global power mergers and acquisitions (M&A) market remained strong through 2018, reaching US$158bn, the second highest in the last five years.

Deals registered in 2018 decreased slightly, from 651 to 622 in 2018.

The statistics, researched by leading data and analytics company GlobalData, found that out of the 622 transactions reported in 2018, 597 were acquisitions while the remaining 25 were mergers.

As of 2019 year-to-date (YTD), 244 M&A deals were witnessed. The largest announced M&A deal in the power industry in 2018 was the acquisition of Innogy by E.ON for US$52.9bn.

The report, ‘M&A in Power – Thematic Research’, also revealed that the solar energy segment registered the highest number of M&As during the period 2015–2019 YTD with 661 M&A deals, followed by T&D, wind, fossil fuels and hydropower segments, with 654, 461, 305 and 214 M&A deals, respectively.

The report highlights that over the past few years, the power industry has seen a transition towards sustainable clean energy. Power utility companies in mature markets are now witnessing a wave of consolidations, looking to create scale due to the shift towards renewable energy sources, which is pushing them to alter their business models.

The consolidation through acquisitions is driven mainly by few companies’ incapability to attain that organically and the acknowledgment that companies require collaboration or cooperation for this transition to occur.  

Sneha Susan Elias, Senior Power Analyst at GlobalData, said: “Power and utility companies are focusing on crucial climate goals and measures in the form of clean energy growth and enhanced natural gas-fired generation to deal with the intermittency issues, safety and security of energy supply, phase-out of coal-fired power plants and nuclear decommissioning. M&A deals involving renewable energy are expected to rise in future due to power and utility companies’ transition towards sustainable clean energy.

“Over the coming two to three years, M&A activity in the power industry is likely to remain strong, backed by a global urge to move away from thermal power towards renewables, although the former will remain relevant.”

Image by rawpixel from Pixabay