A Tiger Called Ofgem
In an alarming comment last week, Ofgem, referring to their “consultation on regulating non-domestic Third Party Intermediaries”, said that if Ofgem does decide to implement a unilateral code of conduct on TPIs then it wouldn’t be a “toothless tiger”.
The threat sends a shudder down the spine with Ofgem tackling the apparent ‘issues’ in the non-domestic energy market with a regulation focussed solely on TPIs. That is despite the very concept of a selective code risking the viability of “an important area of competition”.
The irony is that it is energy suppliers, and not TPIs, who have been fined a staggering £39m in the last two years for mis-selling whilst TPIs are widely recognised as being a positive force for competition in the business energy market.
Business Juice have called upon DECC and Ofgem to ensure any ‘code of conduct’ decided upon under this consultation applies equally to all parties involved in selling energy to business customers, regardless of whether they are a TPI, a supplier or any other party.
When challenged on the potential effectiveness of any such unilateral policy Rob Church, Associate Partner at Ofgem said:
“I’m not sure I see it as being a toothless tiger”
Church identified the source of Ofgem’s concerns and the justification for their move for unilateral regulation of the broker market saying:
“The few rogue TPIs, their actions are threatening to break down trust and we’re concerned that breakdown of trust will undermine the important role TPIs play.”
He continued:
“In a scenario where suppliers can only work with TPIs that are accredited to the code – and they know that they will be answerable to us if they work with TPIs that aren’t accredited to the code – I think that sends a pretty strong signal that TPIs will need to be accredited if they want to have a business.”
Mr Church also offered the opinion that a voluntary version of a code wouldn’t “clean up the sector” and a full licensing model would be equally disproportionate.
Balancing his tiger comment, Church said:
“[On a full licencing model] We were concerned the potential impact of that would act as an unfair barrier to entry and would actually do more to undermine the success of the TPI sector.
“Instead Ofgem has looked to bring in a licence obligation on suppliers to work with brokers who are accredited to a code of practice. That’s all suppliers need to do, check that they’re accredited.”
Whilst the tiger comment seemed to be Ofgem attacking a target of easy meat in a sector without the influence or representation of the supplier community, and laying the market’s ills at the door of TPIs, there was some comfort to be had.
That balance was refreshing and a foundation upon which Ofgem should build, not least in this was the recognition that TPIs were a force for good in the market operating as the gateway to competition for the vast majority of businesses.
It is against this backdrop that we have always believed any justification should be made for action in the sector.
Indeed Mr Church himself admitted the good that brokers do and the small minority that transgress rules.
As a result, and in light of the fact that 83% of the Big 6 has been fined for mis-selling in the last 2 years there is insurmountable evidence for a universal code of conduct with a focus on suppliers as well as TPIs.
Until that happens this tiger, however toothless, could seriously damage competition in the business energy market.