Member Article

UK Energy Supply Industry Needs Tough New Regulations, Warns Leading North West Firm.

BRITAIN’S energy supply industry needs tough new rules to stop start-up firms being targeted and ripped off, according to a North West firm.

While the Office of Gas and Electricity Markets (Ofgem) governs the domestic market, the business sector is unregulated and unchecked.

That, says Phil Foster, the MD of one leading energy price comparison service, has created an ‘unethical Wild West’ where brokers are targeting small firms with ramped-up prices.

And he’s now petitioning Parliament and Ofgem to bring about changes that’ll protect SMEs from uncapped charges.

Foster, founder of the award-winning Love Energy Savings, based in Bolton, Lancs, explains: “There’s a real lack of transparency for business owners looking to improve their energy tariff.

“It’s the biggest issue we have right now.

“Ofgem want to protect the domestic market. They’re looking out for the most vulnerable, typically the young and old.

“They assume that a business owner should have the capability, the disposal income to seek legal advice, or have the right people employed to make an informed decision on their energy bills.

“And I understand that.

“But my issue is that not all firms have the time or resource to digest the market. Their energy bill might be a long way down their list of priorities.

“And a lack of regulation of the suppliers is allowing brokers to swoop in and prey on the weak, locking them into sky-high tariffs. It’s an unethical Wild West.

“There’s currently no protection for small firms. Often customers don’t even know they’re being ripped off. They can be offered ‘savings’, but in reality, they should still be paying far less in a fair market.

“And we don’t want to operate in a murky world where people are taken advantage of - we want to operate in a fair and transparent one.”

A third-party broker will typically negotiate a base rate with an energy supplier before a margin is then applied. The combined sum is what a business ends up paying.

But some suppliers are allowing brokers to apply an uncapped margin - ultimately short-changing the customer.

Foster adds: “Some suppliers are actively incentivising third-party intermediaries to apply larger margins. That shouldn’t be allowed.

“If you manufacture a Ford Fiesta, you can’t suddenly start selling it for £100,000 when it’s on the forecourt for £13,000 further down the road.

“Our model relies on good prices because we want a customer for life, not a one-off transaction.”

Foster has engaged his local MP, Sir David Crausby - Labour MP for Bolton North East - who has lobbied Ofgem and Parliament on his behalf.

The response so far has not been encouraging. Foster adds: “We’ve been politely told to go away.

“But it’s a fight we want to continue with because we think it’s the right thing to do.”

Love Energy Savings are on course to arrange some 80,000 individual contracts this year - including both returning and new customers - having traded for 10 years.

Operating predominantly in the microbusiness and SME field, average annual bills for their customers are around £5,000, with a typical saving of £1,046 - 25 per cent of the overall bill.

Retention rate for businesses is an impressive 86 per cent.

That has seen their projected turnover increase to an estimated £20m - up on last year’s £16m.

Meanwhile Foster says businesses need to be better aware of the pitfalls when choosing an energy supplier.

He explains: “You can’t regulate a market when you don’t know who’s in it. Ofgem have no idea how many TPIs are operating - not a clue.

“There’s no central register, there’s no accreditation code, there’s nothing.

“Before we can start looking at what’s being offered to business customers, let’s try and understand who’s in the market in the first place.”

Earlier this month Ofgem announced proposals for ‘tougher’ price controls for energy networks, which they said would deliver savings of more than £5bn to consumers over five years.

That includes caps on how much suppliers can pay shareholders while shaving up to £25 a year off the average household gas and electricity bill.

This was posted in Bdaily's Members' News section by Love Energy Savings .