The Energy Ombudsman Is Letting Small Businesses Down.

by | May 5, 2021

The Energy Ombudsman Is Letting Small Businesses Down.

Is the Energy Ombudsman fit for purpose?

Is it protecting small businesses from the well documented dubious selling practices of some energy suppliers?

In my experience, no. 

 

Why does my opinion matter? Because I have spent 20 years working in energy and I’ve represented numerous small business is disputes that have been adjudicated by the Energy Ombudsman.

According to its own website The Energy Ombudsman is in place to support consumers and empower businesses, provide independent dispute resolution and to ensure fair treatment for all. The Energy Ombudsman is regulated by both the Ombudsman Association and NEON, a network of European Ombudsmen services, active in the energy sector.

Its purpose is to provide a fair and impartial approach to dispute resolution, which considers both sides of the story, relevant regulation, the law and best industry practices.

In my experience I have found them fundamentally flawed in all of the above.

“we are not legally trained”

One of the Energy Ombudsman’s case handlers’ most quoted mantras is “we are not legally trained”. If it is a question of contract law you are attempting to raise with the Energy Ombudsman, forget it, they won’t help you. And considering that virtually all businesses are supplied energy, under contract in the UK, this is a pretty big hole in their ability to balance the playing field between small businesses and large PLC energy supply companies.  

Now they could, and do argue, that they are not here to provide legal remedy, that is the job of the courts. But what we should, and do expect, is for the regulator to fully understand the legislation that underpins the deregulated energy markets, and to insist that any energy supplier, licenced by Ofgem,  abides by the legislation.

Available in full here. https://www.ofgem.gov.uk/licences-industry-codes-and-standards/licences/licence-conditions

The ELECTRICITY ACT 1989 & GAS ACT 1986 Standard conditions of supply licence’s.

The ELECTRICITY ACT 1989 & GAS ACT 1986 Standard conditions of supply licence’s regulates how licensees can operate within the marketplace. This has been amended several times since 1989 and covers all aspects of the energy supply sector, from selling energy supply contracts to billing processes and standards of customer care and service levels. 

It is an all-encompassing piece of legislation that when fully utilised, protects consumers from the material imbalance that is incurred when a household or small business contracts with a £Billion PLC for an essential service.

The “Third Party Dispute” loophole .

In the course of our interactions with the Energy Ombudsman, while representing the rights of small businesses, we have consistently come up against certain energy suppliers attempting to use a loophole to circumnavigate around certain parts of The ELECTRICITY ACT 1989 & GAS ACT 1986 Standard conditions of supply licence’s.

And guess which part they are attempting to circumnavigate? Yes you guessed right, the sales process, the part of the supply licence that was recently amended and beefed up, due to what?

You guessed it, energy contract mis-selling.

A legal issue

Now the whole issue of third party involvement in a contract between two parties, is fundamentally a legal issue. However, there is precedence within the industry, going back to day one of deregulation. A business bestowing third party status to an energy broker, consultant, or comparison site, referred to as a third party introducer (TPI), is fully accepted within the industry, on the proviso that the business provides a legal document.

This document is universally referred to as a Letter of Authority. It is generally a letter of fact, printed on a businesses headed paper, which outline’s what third party powers the businesses wishes to bestow onto the TPI.

“de facto third party ”

However according to recent Energy Ombudsman rulings, if a supplier uses a broker to process your energy contract. The broker does not have to get your express permission to become a full, legal party to your contract. They just become party, de facto.

No recourse for mis-selling

This means, if you have any complaint or issue regarding the contracting process, i.e., you have been misled, mis-sold or given incorrect information. Then you have zero recourse through the Energy Ombudsman if your contract has been processed through a TPI.

TPI’s are not regulated and do not have to operate in adherence with The ELECTRICITY ACT 1989 & GAS ACT 1986 Standard conditions of supply licences.

Considering that TPI’s process over 65% of all energy contracts, some would argue that this is an extremely cynical and unfair way for energy suppliers to attempt to circumnavigate their legislative obligations and I would agree.

It creates a material imbalance in the rights, obligations or interests of the licensee and the Micro Business Consumer in favour of the licensee; in breach of Standard conditions of electricity supply licence 0A.3.

The legislation is there, why is the Energy Ombudsman allowing power companies to get away with it ?

Dude where’s my call recording?

To further compound the potential issue of mis-selling, the TPI does not have to provide all call recordings as evidence of your contract, even if you accuse them of lying to you, in order to get your agreement. (Like the people that ring you and say they are a supplier, only to actually be a broker!). In one instance we have dealt with, the Energy Ombudsman was happy that a customer was contracted on the back of a two minute conversation.

The Energy Ombudsman stated in its decision “the more in-depth discussion surrounding the contract is usually not recorded but this is not deemed unreasonable”. No energy contract is sold and contracted in one call. By allowing energy suppliers to provide only a segment of the conversation that led to the completion of the sales process, the Energy Ombudsman is inviting mis-selling, in an industry which has already been scandalised with mis-selling at a corporate level.

The Energy Ombudsman is not fulfilling its mandate to protect small businesses

In summary, the Energy Ombudsman is allowing energy suppliers to circumnavigate legislation by accepting a premise of third party status to TPI’s, who have not been granted it by the energy consumer, against all accepted industry norms and legal precedent.  

It is also allowing the mis-selling of energy contracts by deeming it acceptable for TPI’s and Energy Suppliers to only provide a small portion of the contracting conversation as evidence of a verbally agreed supply license.

An open question to the Energy Ombudsman

Is it good, fair and best practice, to allow an unregulated entity, to sell a legally binding contract into a regulated marketplace? 

Can the rights and remedies of a Micro Business supply contract, be held and administered by an entity not licensed by Ofgem? 

For some reason the Energy Ombudsman has been unable to furnish us with an answer to these direct question’s, and this is why, in our learned opinion, The Energy Ombudsman is not fit for purpose. 

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