Our work to ensure a fairer energy broker market
Last week, ITV reported that thousands of UK businesses are considering legal action over deals arranged by energy brokers. They highlighted that a minority of bad brokers have been charging hidden commissions and not providing deals that have their customers’ interests at heart. This highlights the importance of the work that we are doing to ensure a fairer energy market, in particular through the introduction of a TPI Code of Practice that will raise standards and confidence in the brokers that consumers and energy suppliers deal with. Learn more and respond to our consultation below.
Why are we introducing a Code of Practice?
Earlier this year, we met with non-domestic Brokers and Suppliers, asking, “How can we more effectively govern non-domestic Brokers?” Both parties agreed that Brokers play a vital role in helping business consumers find and secure energy tariffs and services that are appropriate for their business.
However, it was also recognised that the lack of regulation and oversight of brokers and aggregators had allowed bad practices to go unchecked, such as encouraging customers to enter unfavourable contracts or being unclear about commission levels. These issues were also featured in the ITV report.
Our engagement at these workshops with non-domestic energy suppliers, brokers, aggregators, and other stakeholders showed strong support for improving governance in this market sector. In particular, there was an overwhelming call to introduce standards that would improve practices.
Building upon previous work by Ofgem, we have drafted and are now consulting on a TPI Code of Practice, refining the content and completing a legal review before it is adopted as a REC document. We expect the TPI Code of Practice to be baselined and come into effect as a Category 3 REC document on the 1st of October, 2023. It is hoped that from that point, all reputable TPIs and the suppliers and consumers with whom they interact with will have a single point of reference and be able to confirm their adherence to a common set of principles.
You can read the TPI Code of Practice here.
Will the Code of Practice have teeth?
The message on this from workshop attendees and other stakeholders has been clear. We recognise that for the TPI Code of Practice to provide meaningful assurance to suppliers and customers, we will need to introduce arrangements that demonstrate which TPIs are signed up to the Code of Practice and whether they are compliant with it. To ensure a level playing field, we propose that the REC will require suppliers only to use TPIs compliant with the Code of Practice.
We have raised REC Change Proposal R0137 to put these requirements into effect, and in the coming months, we will develop the rules and associated accreditation scheme. We recognise that introducing a TPI Code of Practice may impact competition; whilst it is expected to raise consumer confidence in and engagement with the market, it may also raise costs for existing brokers and future market entrants. As such, we expect that a costed Change Report on R0137 will be referred to Ofgem for a decision.
In July 2023, the Government published responses to its Call for Evidence on the potential regulation of TPIs in the retail energy market. In the Next Steps section of that document, the Government noted that:
“[RECCo] are currently in the process of developing and introducing a code of practice to the TPI market that has input from both suppliers and TPIs. The Government will be watching the development of the Code with interest and will remain in contact with RECCo to understand more about the code’s implementation.”
Our TPI workshops also highlighted issues around the non-domestic switching process, particularly the misuse of the Change of Tenancy (CoT) flag and Objections process. We are pleased that Ofgem has also recognised these issues. In its “Non-domestic market review: Findings and Policy Consultation”, published July 2023, Ofgem noted:
“The Retail Energy Code Company (RECCo) manages the rules set out in the Retail Energy Code. Given this change of tenancy indicator is flagged via industry processes, we propose that the agreed documents to prove CoT should be developed and agreed upon within REC processes. We have discussed this with RECCo, who also identified a need for clear guidelines for change of tenancy. We will work with them to take forward discussions with stakeholders to agree on the core documents to be requested. We want this work to commence as soon as possible and have the range of documents identified this year and the change proposal given effect through the REC by the end of the financial year to include the list within the rules of transfer.”
As indicated, we have started work to address this issue and will raise a Change Proposal to the REC this Autumn. To inform the development of this change, we will shortly invite interested stakeholders to participate in a workshop, the timing and details of which will be confirmed and publicized alongside our response to the Ofgem document on the 6th of September, 2023.
If you would like to find out more, submit feedback about the TPI Code of Practice, or register interest in attending the workshop on Change of Tenancy issues, please contact firstname.lastname@example.org