Summary: Ofgem Microbusiness Strategic Review

In June 2021, Ofgem initiated a consultation process to address the key harms experienced by microbusinesses in the retail energy market. On 28th March 2022, they released their decision to enact a package of measures designed to enhance the experience of these businesses (the Decision). 

Microbusinesses constitute a major segment of this industry, as evidenced by their expenditure of £4.2bn with major suppliers in 2021. Unfortunately, these entities have endured great challenges from the Covid-19 pandemic and elevated energy prices recently. Thus, the Decision seeks to provide microbusinesses with dependable safeguards and critical knowledge for making prudent buying decisions in the future.

What was announced?

  • Microbusinesses must be given details on brokerage costs through the main terms. Suppliers must provide this amount in GBP for the whole contract.
  • Principal terms must be presented to microbusinesses before and after contracts are established.
  • Ofgem have ruled that microbusiness contracts no longer require termination notices, apart from evergreen contracts. 
  • Ofgem are striving to enhance information and understanding for microbusinesses, joining forces with Citizens Advice to create new content before this year’s launch dates. 

All of these measures started coming into effect from 1st October 2022.

  • Suppliers must only work with brokers in compliance with a qualifying Alternative Dispute Resolution (ADR) Scheme.

The Ombudsman Services are administering the program, with details posted on their website. Brokers who haven’t interacted with them can get more info here.

This measure came into effect on 1st December 2022.

  • Ofgem opted against the 14-day cooling-off period due to challenges with the faster switching plan, but may review the proposal in the future.

What’s the impact on businesses?

These announcements offer more clarity for businesses, as well as improved safeguards in the turbulent energy markets. The main goal of this effort is to improve the microbusiness experience in the retail energy market and we consider these decisions an important step towards accomplishing that. Other policy-related works need further decisions from government authorities, especially those related to proposed regulatory frameworks for third-party intermediaries. 

Nevertheless, these determinations will bring about largely positive impacts, so we anticipate working with our business customers through this year and onwards. If you are a broker or microbusiness seeking further details on this topic, do not hesitate to contact us.

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