Ofgem confirms the final Microbusiness Strategic Review decisions

Following a lengthy consultation period, Ofgem have now published their final decisions on the Microbusiness Strategic review.

Since the first draft proposals were announced back in July 2020, the scope of this reform has been focused on addressing key harms faced by microbusinesses in the retail energy market. 

Good Energy have been a supporter of this workstream, and welcomes moves from the regulator to improve transparency and ensure greater protections are in place for microbusinesses. 

What’s been announced? 

  • Transparency of brokerage costs – information on brokerage costs must now be provided to microbusinesses via the principal terms. Suppliers will need to present this as a total cost in pounds covering the duration of the contract. 
  • Provision of principal terms – there will be new requirements to ensure principal terms are brought to the attention of microbusinesses both pre-contract and post-contract. 
  • Removing termination notices – Ofgem have decided to remove the requirement to provide termination notices for microbusiness contracts, with the exception of evergreen contracts. 
  • Improving information & awareness - Ofgem are pressing ahead with the proposal to improve awareness materials and information for microbusinesses. They will work jointly with Citizens Advice to create new material ahead of the implementation dates later this year. 

All of these measures above will come into effect from 1st October 2022.

  • Alternative Dispute Resolution (ADR) Scheme – there will be a new requirement for suppliers to only work with brokers who have signed up to a qualifying ADR scheme. 

The Ombudsman Services will be running the scheme and have published details about the process on their website. If you are broker and haven’t engaged with the Ombudsman Services yet, you can find more information here. 

This measure will come into effect later this year, from 1st December 2022.

  • Cooling off period – highlighting difficulties with the rollout of the faster switching programme, Ofgem have decided against introducing the proposal to introduce a 14-day cooling-off period. They have suggested they may revisit the proposal at a later date. 

What’s the impact on businesses? 

These announcements provide greater levels of transparency for businesses, as well as enhanced levels of protection. In the context of a volatile wholesale energy markets, these changes are arguably more important than ever. 

One of the overriding objectives of this workstream is to improve the microbusiness experience in the retail energy market. We believe the decisions announced are an important step towards achieving this. 

In the wider context, there are several other policy workstreams that still require further government decisions – namely the new proposed regulatory framework for third-party intermediaries. 

However, in the meantime, we believe these decisions will deliver a largely positive impact and we look forward to working with our business customers and brokers throughout this year and beyond. 

The majority of the changes will begin to take effect from autumn this year, giving businesses and brokers time to prepare for the changes. If you are a broker or microbusiness reading this and would like more information, please don’t hesitate to get in touch. 

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