Energy regulator Ofgem is urging the government to grant it new powers to protect small businesses from aggressive and misleading marketing by third party energy brokers.
New powers to enforce the Business Protection from Misleading Marketing Regulations would allow Ofgem to take direct action against “rogue” brokers who mis-sell energy to businesses, it said.
It would add to the new package of tougher rules Ofgem has proposed for how suppliers should treat their business customers, following its investigation of the retail market.
According to Citizens Advice, 42% of mis-selling complaints from small businesses between November 2011 and October 2012 contained references to broker behaviour. High-pressure sales tactics and cold calling topped the list of complaints.
Ofgem is also developing a code of practice for brokers.
“Small businesses are an engine of growth in our economy and it is crucial that they get a fair deal in the energy market,” Philip Cullum, consumer partner at Ofgem, said. “Many brokers play an important role in helping firms compare the market. However we want powers to take action against intermediaries that mis-sell, so businesses can have more confidence when using brokers.”
Association of Convenience Stores chief executive James Lowman welcomed the call. “Many local shops use brokers to deal with their energy contracts, but the rules guarding what they can and can’t do are not strong enough to protect retailers from abusive sales tactics,” he said. “Ofgem has highlighted a wide body of evidence of misleading practices from brokers, including the mis-selling of energy contracts at a higher price than promised.”
Ofgem is also in the process of reviewing suppliers’ use of rollover contracts for small businesses that employ 10 or less people. It is considering if rollovers should be banned, and is also putting pressure on suppliers to limit back-billing for small businesses to one year.
Eight suppliers, including British Gas and Npower, have so far agreed to this, and the regulator is calling for more to follow suit.