Open letter to Ofgem
On the 2nd September, our Managing Director, Phil Ager wrote an open letter to Ofgem and Jonathan Brearley expressing concern with the general lack of protection for all businesses (not just micro businesses) that get caught out by unscrupulous energy brokers who hoodwink customers into providing an authority letter allowing them to accept supply contracts on their behalf - so called level 2 authority letters.
In response to your publication 29th July 2020 “Fairer energy deals for microbusinesses”
We have operated as a third-party intermediary (TPI) in the energy sector for many years and have always promoted and supported transparency in supplier commissions. Indeed, we recently published an eBook to highlight the tactics often used by rogue energy brokers and the considerations businesses should have when they are looking to engage the services of an energy partner.
Whilst plans that OFGEM have unveiled are a welcome step in the right direction, our concern is the general lack of protection for all businesses (not just micro businesses) that get caught out by unscrupulous energy brokers who convince customers to provide an authority letter that allows them to accept supply contracts on their behalf – so called level 2 authority letters.
These brokers then corroborate with preferred suppliers to set up energy contracts with unfavourable terms, typically including a huge commission for the broker and higher margin for the suppliers in question. It is also common practice for some suppliers to offer hefty up-front commissions at the point a supply contract is signed as an incentive to bring them new business.
In these circumstances, it is both broker and supplier who are at fault. No supplier should accept a contract that has been signed by a third party. Furthermore, up-front commission payments drive the wrong behaviours within energy broker and energy supplier sales teams as they incentive carelessness and a disregard for customer care.
We feel it is time for OFGEM to again review the introduction of a TPI code of conduct or gold standard accreditation that both energy suppliers and energy brokers could sign up to. I feel confident in saying that any TPIs who provide a genuine service and charge a fair commission for the service they are providing would welcome this.
For TPIs and suppliers willing to commit to a gold standard accreditation, all parties would only ever process supply contracts that have a customer signature on them. The key is to provide businesses with re-assurance that they are working with a trusted advisor who provides complete transparency on the service they are providing, together with what and how they are being paid.