How Ofgem’s New Energy Proposals Will Affect Small Businesses

By | November 25, 2011

With the economy in a fragile recovery, Ofgem has recognised the valuable role that small businesses play in bringing it back to a healthy state. Perhaps this is why they have just announced new proposals to govern the way energy providers interact with these small businesses. If enacted, the new proposals will benefit small businesses in several ways, mainly in demanding greater transparency from energy providers and keeping market competition robust.

These proposals will go through a round of public debate and possible adjustments before they are made official, but at first glance they suggest a promising change to an energy industry that many business owners feel takes advantage of its customers with unfair practices.

What do the Ofgem proposals mean for small businesses?

Transparency in marketing and selling is a major concern for Ofgem, as demonstrated by its suggestion for a more comprehensive code of conduct for energy suppliers. These new standards would require companies to be more forthright in both advertising and selling their services, which includes communicating to the customers in a simplified language, no matter the medium. Sales activities would also be subjected to more scrutiny to ensure that energy providers are not engaging in unfair or misleading practices.

Ofgem has also elected to extend the definition of a micro business to include those that have up to 50 employees. This significant change in terminology would mean that more businesses are included in the umbrella of protection that Ofgem provides in terms of how energy companies negotiate contract conditions and requirements for contract roll over.

The final proposal of the gas and electricity regulatory body is to prevent energy providers from exerting pressure on consumers who would like to switch companies. This is part of Ofgem’s attempt to make sure that the energy market maintains a competitive and consumer-friendly landscape.

Could Ofgem have gone further?

While small businesses are happy to witness a more robust conversation about how to protect them from the unfair practices that energy companies sometimes engage in, many of them would like to see a few more changes. Amongst concerns not addressed in Ofgem’s proposals are back billing practices that some business owners view as unfair.

Currently, a small business can compare prices for business energy using services like uSwitchforbusiness, but they may not be able to make the switch to a cheaper service if they receive push-back from their current providers.

And though Ofgem proposes a more strict code of conduct as it relates to allowing consumers to switch to another provider, some companies would like to see the regulatory commission go even further by requiring energy providers that prevent consumers from entering a contract with a competitor to provide a justification for doing so.

Note from the Editor: This is a guest post.