British Businesses Supported To Settle Energy Disputes

5th April 2024

Energy Ombudsman expanded to offer free support for small businesses and organisations over energy contract disputes.

Small businesses to get access to free redress and support from Energy Ombudsman for the first time.

Businesses will also be able to resolve energy broker disputes without costly court appearances.

The move marks first step in crackdown on energy brokers charging rip-off fees.

Businesses will get free support to resolve issues with their energy contracts, as part of government and Ofgem changes to tackle cowboy practices like hidden fees, inaccurate energy bills and pressurising sales tactics for energy contracts.

Small organisations with fewer than 50 employees will be entitled to free support from the Energy Ombudsman on disputes with their energy supplier. It will extend the service to cover 99 per cent of all businesses in Great Britain, giving them the confidence to grow - as part of the government's long-term plan to boost the economy and improve economic security for all.

The Ombudsman has the power to order suppliers to provide compensation of up to £10,000 or take action to resolve issues - such as raising standards for their customers, or to credit or amend customer accounts.

The move will also enable businesses and other organisations to settle disputes with their energy broker via the Ombudsman, without the need for costly legal proceedings - as part of changes set out by the government and Ofgem today. It is a first step in a crackdown on rogue energy brokers targeting small organisations with thousands of pounds in hidden fees.

Energy Affordability Minister Amanda Solloway has today warned energy brokers to end these unacceptable practices, with the government planning to consult later this year on regulating brokers and other third-party intermediaries.

Minister for Affordability and Skills Amanda Solloway said, "We take pride in our British businesses and that's why this government will always stand by entrepreneurs.

All businesses deserve to get a good service from their energy supplier – and today’s changes will empower small businesses with free redress support via the Ombudsman.

This is just the beginning. Rip-off energy brokers have no place in our market and we will act to raise standards for customers.

Energy brokers are used to help small businesses and organisations, like charities or schools, find the best energy deal for their needs - which larger businesses often manage in-house. This can leave smaller organisations vulnerable to unfair fees, with only the courts as a route to redress.

Households and companies with fewer than ten employees can already use the Ombudsman to settle disputes with their energy supplier – including energy bills, customer service, or how a product has been sold by an energy supplier.

The expansion to this service coupled with the reforms from Ofgem will come into force later this year, empowering small organisations to seek redress from both suppliers and brokers over any unfair terms in their future energy contracts.

It forms the government’s latest boost for small businesses, as SMEs benefit from a tax cut package that came into force this week.

Ed Dodman, Director & Chief Ombudsman for Energy Ombudsman said:

We’re very pleased with this announcement – we believe that businesses should have the same access to support as consumers and the addition of small businesses is very much welcomed.

It now means that they have access to a free, impartial and independent body to help them resolve disputes with their energy supplier. By extending the services to cover all small businesses, it fills an existing protection gap and means organisations, who may have more limited resources, will be able to access the support they need.

Alongside today’s announcement, Ofgem has also set out wider plans to improve energy services for businesses and other non-domestic customers. These include:

A new requirement for energy brokers to provide full transparency over fees within their contracts, so customers can access the competitive choice they deserve.

A change in rules that will mean energy suppliers can only work with brokers who are part of a redress scheme, when securing small business contracts. This will ensure these customers always have access to free and fair support with any disputes, helping to rebuild confidence in broker services.

Signposting non-domestic customers to a range of redress routes in addition to the Energy Ombudsman, by allowing small organisations to raise complaints against their broker or supplier via alternative advice services, such as Utilities Intermediaries Association.

Expanding their Standard of Conduct rules for energy suppliers to ensure all businesses receive the same level of support with issues, such as making it easy for businesses consumers to contact their supplier and access the information they need.

Martin McTague, National Chair of the Federation of Small Businesses, said, "Allowing more small businesses to take their cases to the Energy Ombudsman is the right thing to do, and something we have campaigned for, as there’s a huge imbalance in terms of resources and legal firepower between a small firm and an energy company. The era of small business owners having to use their own savings to try and get a just resolution to an energy dispute needs to end.

Ensuring that energy suppliers can only work with brokers who are a part of the redress scheme will go a good way towards protecting small businesses from mis-selling and bad practice, as will the new fee transparency requirements. Honest and reputable energy brokers play an important role, and small firms deserve better protection from rogue operators, which these new rules should help provide.

The government will consult on proposals for regulating Third Party Intermediaries in the energy market (energy brokers) later this year. Further details will be announced in due course.

This consultation proposed a new definition for small businesses, alongside the existing microbusiness definition in the Gas and Electricity Regulated Providers (Redress Scheme) Order 2008.

The new definition builds on a combination of 3 thresholds, specifically the number of employees, annual turnover, and energy consumption levels, covering entities with:

fewer than 50 employees or their full-time equivalent, AND an annual turnover of at most £6.5 million or a balance sheet total of £5.0 million
OR

an annual electricity consumption of not more than 200,000 kWh (revised from the originally proposed 500,000 kWh)
OR

an annual gas consumption of not more than 500,000 kWh