Energy regulator Ofgem will be launching a review of the small business energy market this year to protect microbusinesses from being ripped off. The Competition & Markets Authority estimates that small businesses are overpaying on energy by £500 million a year, with suppliers making four times the margin on small businesses than they do on large customers.

The UK has energy regulations in place to protect households, and Ofgem will examine whether to put in place similar protections for the UK’s smallest firms.

Why the small business energy market review?

Many small businesses are investigating the possibility of reducing energy bills through suppliers and energy brokers. Also known as third-party intermediaries (TPIs), brokers act independently to compare the energy market and secure better energy deals from the companies they represent. But because brokers are not officially regulated, businesses currently have little protection from bad actors.

How bad brokers manipulate the small business energy market

Many small businesses simply lack the time and resources to invest in energy management. This can make them vulnerable to unscrupulous brokers who take advantage of customers instead of offering services with the customer’s best interests at heart.

For example:

  • Inflating energy costs to allow the collection of hidden commission.
  • Claiming too much commission or ‘uplift; even if they manage to negotiate better energy costs for the customer.
  • Making inaccurate statements, unsubstantiated claims, or being indirect in sales calls.
  • Being overly pushy or unprofessional on sales calls.
  • Using high-pressure tactics on sales calls.
  • Taking advantage of vulnerable customers.

What to do if you’ve been targeted by an unscrupulous broker

If you think they have been unfairly treated, you can take any complaints about your broker to the ombudsman. The ombudsman will then decide whether or not they will uphold the complaint, and there’s no guarantee that you’ll be able to claim money back.

Some businesses even go as far as paying thousands of pounds to exit energy contracts.

Ofgem’s regulation of the small business energy market

As a result of cases of energy contract mismanagement, particularly in the small business energy market, Ofgem now has the opportunity to take action and improve consumer protection, extending this to non-domestic protections.

An Ofgem statement said: “As part of our consideration of more fundamental reforms to the retail market, we will carefully consider how the scope and form of our regulation may need to change. This year, we will be conducting a strategic review of the microbusiness retail market to understand market challenges and consumer experience. The review will identify the case for short and medium-term actions. We expect to publish an opening statement over the coming months and will invite views and evidence from stakeholders to help inform our thinking.”

Smarter Business welcomes the small business energy market review

We are proud of our commitment to total compliance, and we welcome any regulation of the small business energy market that will benefit consumers and help them save on energy.

It’s up to us to ensure that the customer journey is 100% transparent. The rules of engagement have changed, and transparency and compliance always at the forefront. Anyone can sell, but it’s our aim to do it transparently and compliantly. We take our role very seriously that it’s up to us to do the right thing by the customer, providing an unbiased sale at the best possible price. Of course, we have to make a margin, but it’s up to us to keep this margin fair.

Although national-level regulations are lacking, a number of energy suppliers conduct their own TPI audits. All our suppliers who conduct audits have found us to be compliant. In fact, we were the first TPI to achieve Total Gas and Power’s stringent ‘Platinum-Accredited Compliance’.

Internally, we conduct a monthly compliance day to encourage compliant habit practices and processes across the board. Consultants are reminded of compliance best practice, transparency, industry knowledge, and maintaining professionalism.

Smarter Business Sales Director Helen Grove is passionate about ensuring compliance in everything we do: “I meet with my suppliers every 4-6 weeks, and I want to be able to sit in front of them and feel proud of the business I’m bringing them. Yes, our volumes probably could be higher in terms of sales, but that’s not the kind of volume we want. We prioritise quality over quantity. Anybody can do 1000 contracts a month, but can they do 1000 contracts with 90% live rates and 90% accuracy? We can.”

WATCH: Helen Grove talks about the value of transparency