Ofgem wants power to tackle misleading energy brokers

23 November 2011

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23 November 2011 | Adam Leach

Energy watchdog Ofgem has called on the UK government to give it the power to take direct action against energy brokers who mislead buyers.

The call for the increased powers came as the regulator announced a number of reforms aimed at strengthening support for businesses buying energy by tackling misleading sales and marketing, making it less punitive and difficult to switch suppliers and toughening the conditions for vendors to be awarded licences.

These proposed reforms, targeted specifically to help corporate energy purchasing, are the second in a four-stage plan by the watchdog. In October it announced measures to make the energy market more competitive. Reforms of the electricity market and of increasing the transparency of energy company accounts are also planned.

A lack of transparency from some brokers - in particular the reluctance to disclose whether or how much commission they are paid by suppliers - has long been apoint of concern for businesses, so Ofgem’s move for new powers and an accreditation scheme for codes of practice in the sector is significant.

Explaining the issue around broker transparency, Chris Lewis, a former chairman of the CIPS energy committee, said: “A lot of [brokers] didn’t and probably still don’t disclose [the level of commission] from suppliers to the customers because they go to the customers and say we can give you advice, we can fix you up and so on, on your next energy deal but we won’t charge you. They get their money from the supplier but they don’t broadcast that.”

Martin Rawlings, director at Blizzard Utiliities, told SM: “I welcome Ofgem’s announcement of a code of practice for brokers. This has been my crusade for a number of years as in my experience many customers have been kept in the dark by many brokers about the level of commission taken from the supplier.”

Through the reforms, Rawlings would like to see an industry kite mark created, with suppliers only doing business with brokers judged to be reputable.

“Surely the easiest way of applying a code is to have a kite mark which all brokers have to obtain and then suppliers will not do business with those who do not have the kite mark,” he said. “In addition, failure to comply with the code will result in the broker losing the kite mark and their status in the market to do business.

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