Business Energy Market Update: July 2024

At the end of June the electricity market closed roughly 12% lower across the board compared with the end of the previous month. Gas fell by a similar margin across all forward contracts up to the end of this year and further out the market remained bearish but saw reductions closer to 5%. The predicted return to full operation of the Sleipner field and the return of gas flows into Easington no doubt helping to ease the situation.

Despite the recent reduction in the cost of the Energy Price Cap for domestic consumers, wholesale prices are still trading around 50% higher than they were at their lowest point this year and are set to rise further. Analysis from Cornwall Insights still points to a continuing upward trend into Q1 of 2025 and have recently revised their estimate of October’s price cap upwards by over £100!

Ofgem Non-Domestic Market Review – Decision

Earlier this year OFGEM published a review of its findings on a consultation to define their vision of a better energy market for non-domestic customers. The review will bring change for both suppliers and Third-party intermediaries alike and also reaffirmed Ofgem’s intention to increase business customer protection and promote transparency across the industry.

The biggest change will see more customers offered the protections afforded to Micro Businesses and an extension across the market of protective legislation.

The review can be reduced to 6 major areas of reform:

Introduction of Small Business Consumers category and Energy Ombudsman Threshold Expansion

Micro Business customers already enjoy more protection and better support. Now small businesses, many of whom do not have the financial resources or industry knowledge required to access redress effectively or independently and who cannot be classified as micro businesses, will soon be able to access more help and support. This will include the ADR scheme, which can mediate between businesses and energy brokers.

The new Small Business definition, which is mutually exclusive of the Micro Business definition, will be introduced alongside the proposal to expand the Energy Ombudsman threshold. Currently the timescales for this to be introduced are unclear at this time due to parliamentary restraints.

The proposed Small Business Consumer definition:

• Fewer than 50 employees or their full-time equivalent AND an annual turnover of at most £6.5 million or a balance sheet total of £5 million

  OR

• An annual consumption of electricity of not more than 200,000kWh

  OR

• An annual consumption of gas of not more than 500,000kWh

Complaints Handling Standards expansion

The Consumer Complaints Handling Standards (CHS) prescribe how energy suppliers handle and record complaints currently for micro business customers.

It has since been confirmed that the CHS regulations will be amended to capture the new Small Business Consumer definition. The expansion also ensures that alignment occurs with the government’s proposal, as it gives SBCs the right to be signposted to the Energy Ombudsman.

Citizens Advice signposting

Suppliers will be required to signpost both Micro businesses and Small businesses to Citizens Advice and Citizens Advice Scotland. The introduction of this requirement is part of an effort to increase non-domestic customers’ awareness of Citizens Advice and ensure that they are kept informed of the support available and receive support on any issues they may have.

Energy Broker / Consultant Redress scheme expansion

In 2023 Ofgem introduced a requirement for Brokers and Energy consultants to sign up to a Qualifying Dispute Settlement Scheme (QDSS) in a similar fashion to Energy Suppliers. The scope of the scheme was limited to brokers dealing with micro business consumers only. The scheme will now be expanding to include businesses who fir the definition of a Small Business Consumer.

Energy Broker / Consultant Commission disclosure

Under current regulations, energy suppliers are only required to disclose broker commission information to micro businesses to enable customers to make more informed decisions when selecting a supplier. This stipulation will now be for required for all non-domestic customers on a cost-per-unit basis. It was also emphasised that micro businesses will retain their current prescribed format of a cost-per-unit basis and a lump sum.

Standards of Conduct expansion

Currently OFGEM stipulates that each supplier adhere to clearly defined Standards of Conduct (SoC) that focus on the customer outcome when dealing with micro businesses. When conducting their recent market research, Ofgem found that the most common reasons for customer dissatisfaction were broadly similar across customers of all sizes. These results have encouraged Ofgem to expand the SoC to accommodate all non-domestic customers on the basis that it would help to improve the service customers receive and encourage suppliers to treat all customers fairly.