Ofgem rules on retail brokers should be stronger, urges Utilyx

UK energy buyer Utilyx has called on the regulator to take even tougher measures than proposed to promote transparency surrounding the fees charged by the third party intermediaries (TPIs) in the retail energy market.

On Friday Ofgem ended its consultation on a new code of conduct for retail energy brokers, which aims to protect businesses from misselling.

Under the proposed rules Ofgem would require the intermediaries -- including switching websites, energy brokers and energy efficiency advice providers -- to be completely clear with businesses about their fees, the contracts they offer and which suppliers they represent.

But Utilyx has urged the watchdog to go further.

The company called for complete transparency on the fees brokers earn for arranging energy deals, adding that direct regulation of the sector with stringent penalties for bad behaviour is vital to protect customers.

“Under Ofgem’s current proposals, customers will be able to ask for a breakdown of fees and charges involved but that would only be on request rather than being automatically provided,” the company said, adding that this detail should be made available upfront.

Utilyx estimates that around 350 TPIs buy around three quarters of the energy used by UK businesses amounting to £15 billion annually. As much as 0.5% to 1% of the average energy bill could be made up of “hidden charges”, costing UK businesses as much as £100 million per year, the company said.

“We believe it is time customers got full transparency on exactly what fees are being paid for the energy deals they are signing up to,” said managing director of Utilyx, Jo Butlin. “Together with direct regulation of brokers, that is the best way to improve the market, drive more competition and ultimately ensure customers are getting the best possible deal on their energy.”

Under current Ofgem regulation TPIs are not directly regulated in the same way as energy suppliers, although they are governed by general consumer protection rules, and in some cases to voluntary agreements.

“TPIs play an important role in helping businesses compare and choose tariffs and make their energy decisions. However, some do not operate fairly and mislead businesses,” the regulator said following the launch of its consultation in mid-February.

Under the new rules all suppliers will be required to use accredited TPIs which have signed up to the code of conduct. In addition, an industry standard will be put in place requiring a maximum of 30 days’ notice to switch supplier for all small businesses.

The finalised code and licence condition should be in place by the end of the year, Ofgem said.

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