A new rule forcing energy brokers to sign up to a code of practice has got a qualified welcome by energy consultancies which reckon it’s the “best of four options”.
Energy watchdog Ofgem put forward a new code of practice last week which go-betweens for suppliers and business energy users – such as price comparison sites or third party intermediaries (TPIs) – will have to sign up to.
That’s because suppliers will only be allowed to work with a TPI which is a member of the regulator-backed code.
It’s meant to stamp out bad behaviour – particularly by smaller rogue brokers – and several firms reckon it will achieve this.
Andrew Horstead, Utilyx told ELN it’s a “move in the right direction”.
“Something to regulate the TPI market is needed. It’s been left to suppliers and consumers protection channels before, clearly this hasn’t worked. We have to provide transparency on fees.”
Casting an eye over what options the industry had to solve the problem, Mr Horstead said the new code is the “best of three or four”.
He explained: “The first option is, we don’t do anything. That obviously hasn’t happened. Then they could have gone for something voluntary but that would have not weight to it.
“The fourth option would be a license – but there’s a timing and cost [issue] to that option. So the third is probably striking the right balance.”
The energy market is so “complex” it’s perhaps not surprising some people have fallen foul of bad behaviour, he suggested: “Because of the terms and conditions, you do rely on advice given.”
While he is familiar with “half a dozen” energy consultancies when out and about, the analyst expressed surprise at the vast number of TPIs counted by Ofgem – around 1,000.
He speculated some smaller brokers could be less well behaved, while smaller firms could be less “savvy”.
“Perhaps there are smaller organisations where businesses aren’t transparent and not being totally honest… The customers we deal with know the industry, know the charges but at the smaller end of the market they aren’t able to track it.”
Without a regulator’s rubber stamp there’s are fewer ways for customers to differentiate between firms.
Mr Horstead suggested that’s one of the reasons his firm went down the Financial Services Authority (and now FCA) route a few years ago.
The firm and its rival Inenco are some of the few firms to be FSA approved for energy trading. Businesses signed up to the FCA simply can’t break the rules or a director could go to jail.