Policy & Research
Energy
Non-domestic/business energy
The protection gap
We are increasingly worried about the way micro-businesses are treated, especially in comparison with domestic consumers. The starting point for us is that they should receive the same protections unless it can be shown otherwise. We see both groups suffering from time pressures and knowledge gaps, as well as a lack of information. In addition domestic consumers of micro-businesses suffer if the latter are treated badly.
While there is a cost to regulation, the benefits accrue to both the businesses concerned and the consumers they serve. If the distinction continues, business will inevitably be treated as second-class customers. We think that it should be comparatively easy to ‘extend’ protections as they already exist for domestic consumers – and the precedent is set on complaint handling standards and redress. We would like to see a mechanism to develop voluntary or self-regulatory initiatives, an ERA-equivalent in the non-domestic sector
| Domestic | Non-domestic | |
| Contracts | Evergreen or fixed – and RMR should improve things | Rollovers at punitive rates, expensive deemed rates otherwise |
| Back-billing | Back-billing code = 1 year | Up to 5/6 years |
| Debt and disconnection | ERA vulnerable Safety Net, negotiation and ability to pay LC | Disconnection in a matter of weeks even when debt due to back-billing |
| Marketing | SLC25, self-regulation, consumer protections | Unregulated brokers exploit businesses’ lack of knowledge |
| Information | SLC31 & 31A – Annual Statements | Lack of visibility of contract terms, minimal info on price in public domain |
| Switching | Debt Assignment Protocol, Confidence Code | Churn at half domestic rate, levels of objections |
Contracts
Information is available from Ofgem the regulator on the contractual protections given to micro-businesses at www.ofgem.gov.uk/CONSUMERS/Pages/Bc.aspx.
This licence condition (7A) was welcomed by us but we also support the total banning of currently punitive rollover contracts. There has been inconsistent interpretation by suppliers and businesses are still being ‘punished’ when not fully engaging with the market.
Brokers
Our report Watching the Middlemen flagged up our concerns with brokers or Third Party Intermediaries (TPIs). There is confusion over the OFT/Ofgem role in regulating the behaviour of telephone brokers.
Some brokers use misleading marketing and sales pitches that would not be tolerated in the domestic energy sector, such as the lack of voluntary disclosure by brokers as to their role and how much of the market they actually search. We think a small number of very bad apples responsible for most of the complaints and detriment.
Back-billing, debt and disconnection
Back-billing rules (where supplier at ‘fault’) protects customers and incentivises suppliers to get billing right – but only in the domestic sector.
Last year 40 per cent of all Consumer Direct billing business cases concerned back-billing. Businesses face back-billing periods of up to six years, which might mean a bill of circa. £60,000, and then when the micro-business cannot pay up in a few weeks they face disconnection.
We have major concerns regarding the (short) time some suppliers take before obtaining a warrant for disconnection. Work regarding best practice here is ongoing.
We also know that issues with debt make switching more difficult – and there is a high volume of objections to transfer. Our analysis of Consumer Direct cases suggests suppliers operate just as far as the law allows them as there seems to be very little sympathy for business debt cases. Furthermore while the amounts of debt are concerning, the manner in which businesses get treated is equally worrying – no domestic customer would experience such pressure.
Some experiences of business debt and disconnection are in our report at www.consumerfocus.org.uk/publications/small-business-big-price.
Smart meters and the Green Deal
Our major concern with these policies is that schemes designed for domestic consumers cannot just be transplanted onto businesses eg there is a low use of space heating compared to domestic dwellings. In addition worrying precedents are already being set where advanced meters exist, such as charging for viewing consumption data.
Brokers are also keen to move into these areas so it is imperative their regulatory position is sorted in the near future. We are committed to making sure these major changes work for non-domestic consumers and respond to all consultation and requests for our input accordingly.
