Energy Reform 'Watchdog' Needed

A business lobby group, the Forum of Private Business has warned that Ofgem's shake-up of the small business energy market lacks a dedicated watchdog and could undermine the proposed reforms.

Following its research showing that 94% of small businesses surveyed have seen energy bills rise over the past year – the biggest cost increases they have experienced - the Forum is welcoming Ofgem's proposals to reform the energy market.

However, the watchdog Consumer Focus is being disbanded in 2013 and some of its powers will be passed to the Citizens’ Advice Bureau (CAB). It follows the demise of its predecessor Energywatch in 2008 and the removal its dedicated small business complaints hotline. The Forum is concerned that, unless new Ofgem powers prove adequate, the CAB could prove even less effective at policing any reforms.

"We can only hope that, if established, Ofgem's proposed accreditation scheme for codes of practice would work effectively, and financial penalties would be a big enough deterrent – but there is a risk that the small business energy market will not be adequately policed," said the Forum's Senior Policy Adviser Alex Jackman.

"Ofgem clearly recognises our members' concerns - that the behaviour of energy companies towards their small business customers is all too often unfair and unjust, so these proposed reforms are certainly welcome, particularly addressing misselling and extending the protections against rollover contracts enjoyed by micro businesses to all SMEs.

"But we are concerned that the imminent demise of Consumer Focus, following the closure of its predecessor Energywatch, could leave small firms without a dedicated watchdog," he said.

Many business owners have been hit by misselling at the hands of energy brokers and are reporting contractual issues, including the practice of ‘rolling’ expiring contracts over to often more expensive deals with little or no prior warning, blocking them from switching suppliers to secure better deals.

Ofgem’s proposals focus on placing new standards of conduct into suppliers’ licences with financial penalties for breaches and, to better protect businesses from unfair sales practices, introducing an official accreditation scheme for codes of practice governing energy brokers and secure powers to take enforcement action directly against brokers for misleading marketing.

The energy regulator is reviewing whether suppliers are complaint with license conditions designed to ensure suppliers cannot unjustly prevent businesses from switching to another provider, following a survey in March which found considerable evidence of this.

The Forum’s recent quarterly ‘Referendum’ survey showed that rising energy prices are the biggest cost increases seen by firms over the past 12 months, followed by transport (92%) and the price of raw materials (82%).

Further, 82% of respondents said that overall rising costs have impacted adversely on their business, with 74% reporting that they have inhibited their growth.

(BMcC/GK)