Ofgem aims to tackle 'rogue' energy brokers

8 February 2013

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8 February 2013 | Andy Allen

Energy regulator Ofgem is seeking more powers from the government to take on “rogue” energy brokers that mis-sell energy to businesses.

It wants to be given powers to enforce regulations which protect business from misleading marketing.

The regulator said between 14 and 17 per cent of businesses that used energy brokers when looking to switch providers were dissatisfied. Cold calling, high pressure sales tactics and unprofessional behaviour were common problems.

Currently the Office of Fair Trading is responsible for enforcing the Business Protection for Misleading Marketing Regulations. Ofgem currently has the power to enforce regulations against energy suppliers but not against brokers.

The regulator is considering banning automatic rollover contracts for businesses which employ fewer than 10 people, and limiting such contracts to one year in the case of larger firms. Ofgem is also putting pressure on suppliers to cut ‘back-billing’. Eight suppliers have responded by agreeing to bill small firms no more than 12 months late. The regulator is calling on others to make similar pledges.

Philip Cullum, consumer partner at Ofgem, said: “Small businesses are an engine of growth in our economy and it is crucial that they get a fair deal in the energy market.”

The call has been supported by energy procurement firms. Mark Alston, general manager of ENER-G Procurement, said: “We hope that the government will grant Ofgem the necessary powers to take enforcement action against rogue energy brokers.”

He added: “We also welcome the energy regulator's confirmation that it will review the practice of contract rollovers. It is alarming how many businesses we come into contact with who have failed to renew their contract in time before their renewal deadline and have been rolled over onto extortionate ‘default’ or ‘out of contract terms’.”

David Hunter, energy analyst at Schneider Electric Professional Services (previously known as M&C Energy Group) told SM: “Third parties need to demonstrate they are independent and transparent and we would support anything that can assist that outcome.”

Hunter said a client should be able to ascertain whether a broker has full access to the supplier market, whether they are being paid commission and if so, how much. The client should also be aware whether the commission would be the same from all providers or if there were incentives for the broker to recommend a given provider.

“There is a lack of understanding among companies on how third parties are paid,” he added.

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