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Ofgem has published the long-awaited findings of its inquiry into the non-domestic energy market, with a number of future actions. UKHospitality has been heavily involved in this process, through a response to their call for evidence, multiple roundtables, bilateral meetings and working with Ministers and officials.
What does the review say?
Overall, the report is helpful for the sector within the remit of Ofgem’s existing powers, and positive in terms of their future recommendations. It does not, however, address the issue of businesses tied into very high contracts, beyond recommendations to energy suppliers to re-negotiate terms.
The report clearly highlights that hospitality has been disadvantaged. It was noted that hospitality was not seeing a marked improvement in the market, struggling to secure contracts.
Immediate action Ofgem is taking
Ofgem is taking action where suppliers are not following existing rules related to deemed (uncontracted) rates and the application of Government support measures.
Ofgem has created a security deposit best practice guide as they identified concerns about the size of security deposits and the frequency with which they were being requested
While Ofgem cannot intervene in existing contracts, they are “encouraging suppliers to work constructively and flexibly to provide viable solutions for both parties”. UKH appreciates this may not go far enough so will be actively monitoring this.
Change of tenancy was identified as taking too long and requiring excessive administration, leading to negative outcomes for businesses. Ofgem intends to standardise the documents required for change of tenancy.
Proposed regulatory changes
Ofgem has proposed giving greater powers requiring timely responses to customer complaints and potentially widening the standards of conduct rules beyond microbusinesses.
Ofgem is proposing that third party intermediaries (TPIs, aka brokers) are required to provide information on commissions to all customers.
A recommendation that existing rules are clarified to drive best practice in the setting of deemed rates.
To expand the dispute resolution scheme to businesses of all sizes “to improve customer support directly, ensuring more customers have access to these redress schemes and provide greater clarity on TPI compliant resolution”.
Recommendations to the Government
Brokers are not currently regulated and Ofgem is recommending that this changes and offering support to Government to do so.
A recommendation that access to the Ombudsman is extended beyond microbusinesses, “giving more customers an alternative route to address issues with suppliers” and boosting standards.
For some customers, such as live-in staff in hospitality as well as holiday park residents, the protections applying to domestic customers are not in place. Ofgem is working with Government to identify ways to protect these consumers without leaving them without supply.
Our response
Our Chief Executive Kate Nicholls said: “Ofgem’s market review is extremely welcome, as energy continues to be a critical concern for hospitality businesses. It’s great to see that our ongoing campaigning has been acknowledged and that action is being taken to provide some much-needed support.
“By opening up new channels of communication, extended protections and more guidance, businesses across the industry can benefit from levels of support that simply have hitherto been lacking.
“UKHospitality has continued to raise the reckless behaviour of some energy suppliers with Government, with some offering rates well above wholesale prices, hiking standing charges, demanding eye-watering deposits, and, in some cases, refusing to work with hospitality companies. A recent member survey shows that energy costs are up 80% year-on-year and almost half of businesses who signed a contract at the peak of the energy crisis fearing their business is at risk of failure.
Whilst it has been a long time coming, it is reassuring to see that Ofgem is now doing what it can to support the hospitality sector.
“Energy companies must be held to account, and we are committed to continuing to work with Ofgem and Government to ensure the market is future-proofed. The recommendations in this review must be actioned urgently, as delays could lead to further business failures – of which there have been a significant number.”
Next steps
Ofgem is now consulting on its recommendations and it needs to hear from you about why implementing these changes quickly are so important.
We’re urging all members to respond to the consultation to support our key asks and our calls for swift action.
