Ofgem consults on changes to electricity supply licence conditions

From early 2021, pressure has been building on Ofgem to introduce policy changes to address the perceived lack of fairness and transparency for non-domestic consumers in the energy market.

In 2023, Ofgem and DESNZ jointly commissioned research on non-domestic consumers experiences and the interim findings indicated that particular areas of concern were around expedient and fair resolution of disputes and a lack of clarity around the charges levied by third party intermediaries (“TPIs”). Against this backdrop, Ofgem launched a statutory consultation on 7 December 2023 on electricity supply standard licence condition (“SLC”) changes which aim to improve customer service, particularly around the processing of complaints, and to tighten the rules around supplier engagement with TPIs.

What changes does Ofgem propose to introduce to the licence conditions?

• Expanding the scope of the “Standards of Conduct”: The Standards of Conduct in SLC 0A currently only apply to “Micro Businesses”. Ofgem has proposed to expand the Standards of Conduct to all non-domestic consumers regardless of size or energy use. This expansion would impose binding standards of customer service on suppliers and would render suppliers liable to redress by Ofgem for failing to uphold those standards. -
• Expanding the scope of the Complaints Handling Standards: There is currently a separate consultation being run by DESNZ relating to the expansion of the scope of complaints which may be referred to the Energy Ombudsmen. DESNZ intends to expand the scope of businesses able to access the Energy Ombudsmen to “Small Businesses”. To compliment this proposal, Ofgem have proposed to expand the scope of the Gas and Electricity (Consumer Complaints Handling Standards) Regulations 2008 (which also currently only applies to consumers and Micro Businesses) to Small Business customers. The combination of these proposals, whilst beneficial for Small Businesses, will likely expose suppliers to an increased volume of claims requiring additional resource to process and resolve. -
• Signposting customer support services: Ofgem have also proposed to introduce a new licence condition which will require suppliers to inform Small Business customers that they are eligible to access Citizens Advice on at least an annual basis. -
• TPI redress scheme membership: Presently, suppliers are required to ensure that any TPI that they are working with who are servicing Micro Businesses must be registered with a “Qualifying Dispute Settlement Scheme” (“QDSS”) (which, for electricity suppliers means either the Energy Ombudsmen’s dispute resolution scheme or any other scheme approved as constituting a QDSS by Ofgem). Ofgem intends to expand the scope of this requirement to Small Businesses. The introduction of this proposal will mean that regardless of whether a dispute is a supplier issue or a TPI issue, Small Businesses will have a means of redress which is free to access. However, there is concern that TPIs may pass the registration and implementation costs associated with the QDSS onto suppliers leading to increased costs to consumers. -
• TPI service fee transparency: Currently, suppliers must disclose to Micro Business customers who use a TPI the details of any charges which are paid to the TPI via their supplier energy bill. Ofgem have proposed to expand this obligation to all non-domestic customers. For example, where a customer is a non-domestic customer, but not a Micro Business customer, and they are using a TPI, the supplier must disclose in the “Principal Information” the amount which is payable by the customer to the TPI via their energy bill as a cost per unit of energy or a cost per day/month where it forms part of a daily/monthly standing charge. Ofgem predicts this change will allow customers to compare energy prices more accurately.

The deadline for responses to Ofgem’s proposal is 31 January 2024. Ofgem has indicated that a decision/policy statement will be published in Spring 2024 but that the exact date will depend on DESNZ’s decision on whether to expand access to the Energy Ombudsmen to Small Businesses.

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For more information on the Ofgem consultation please get in contact with Shraiya Thapa, Reece Ballett, Clare King or another member of our Clean Energy, Waste & Sustainability team.