Citizens Advice response to Ofgem’s Microbusiness Strategic Review Policy Consultation

27 Hydref 2020

Citizens Advice response to Ofgem’s Microbusiness Strategic Review Policy Consultation [ 380 kb]

Citizens Advice welcomes the opportunity to respond to this consultation as part of its statutory role to represent microbusiness energy consumers in Great Britain.

We are pleased to see that many of the proposals outlined in this consultation are designed to tackle bad practice by brokers (alongside general improvements in relation customer rights during sales). This is a key area of concern in the sector and ranks 5th out of all contacts from microbusinesses to our consumer service. We are strongly supportive of proposals in relation to:

Broker transparency - Microbusinesses should be aware of the commission that brokers are making in order to assess the value of the service before deciding whether to use them.

Cooling-off period - We often see cases of microbusinesses being sold contracts that they later regret. The cooling-off period will give microbusinesses breathing space and allow them flexibility to change their mind.

Alternative Dispute Resolution (ADR) - Microbusinesses currently have few options if they have complaints about brokers. The ADR scheme will allow customers to access redress, and tackle bad practice.
Broker conduct principle - This will make suppliers take responsibility for the brokers they work with, and drive out bad practice.

Microbusinesses typically have lower levels of engagement than other non-domestic consumers. While the review’s proposals should overcome some barriers, we don’t think they go far enough. In particular:

Awareness - Many microbusinesses are unaware of the third party support services or switching tools available to them. Alongside co-ordinated action by consumer groups, we think suppliers should be required to play a bigger role in improving the information they provide to their customers.
Enabling better engagement - Research for Citizens Advice and Ofgem has shown that some microbusinesses would benefit from improved digital tools to help choose and switch supplier. Ofgem should set out more clearly how it will work with industry to build on the CMA’s price transparency remedy and enable microbusinesses to benefit from a smoother customer journey. To ensure progress is made, Ofgem should take powers to trial new approaches to engaging microbusinesses.

There were a number of areas that we mentioned in our initial response to the Microbusiness Strategic Review call for evidence, which we do not think have been adequately addressed. These are issues which have been exacerbated by COVID-19, and where the situation in the market is likely to have significantly deteriorated since Ofgem began its review:

Debt and disconnection - Debt and disconnections are some of the most common issues the Extra Help Unit (EHU) and consumer service deal with. Microbusinesses often contact us late in the debt process, when there are few options left to help them.

Supplier of Last Resort - Currently, microbusinesses whose suppliers fail lose their credit balance and security deposit, through no fault of their own. To protect them, we think Ofgem should ensure appropriate credit balance management by suppliers, and protection of balances if suppliers fail. This is increasingly important given the rise in supplier failures in recent years, and ongoing financial pressures because of COVID-19.
Vulnerability - We have previously called for more consideration of vulnerability in microbusinesses. We continue to see a need for protection from disconnection for people living in mixed-use premises on non-domestic contracts. We also see cases where, had a microbusiness consumer been on a domestic supply contract they would have been classed as vulnerable. These microbusinesses are particularly at risk of debt and being mis-sold to by brokers, resulting in high levels of detriment.

Ofgem needs to give urgent attention to these issues ahead of the final proposals being made in early 2021.