Managing regulatory risk in B2B energy
In November 2022, Ofgem published an open letter about reports of non-domestic customer harm, where it expressed concern about, “repeated reports about potential detriment that business customers are currently experiencing in the non-domestic energy supply market”.
The issues raised included lack of offers to contact, excessive security deposits and risk premia in pricing. Following a call for input, the regulator concluded there is sufficient evidence to justify more regulation and an extension of their powers. These could involve changes to the rules around complaint handling energy billing, and allowing businesses to resolve disputes through a redress scheme is on the cards. Ofgem is also asking government to extend its powers to regulate third parties including energy brokers.
In parallel, there are ongoing investigations into the behaviour of some suppliers, and it seems likely that fines will follow.
B2B energy suppliers, and the brokers who work in the sector, have, unlike energy suppliers that focus on residential consumers, weathered the recent challenges of the pandemic and energy price crisis. Of the 31 energy retailers to fail since 2021, only a handful were suppliers to businesses.
Having proven resilient, B2B energy suppliers are beginning to benefit from sustained profitability in energy supply and growth in related businesses such as solar installation and energy efficiency advice.
However, if the sector is found wanting by the regulator, that profitability and growth is at risk.
The time to act is now – but across the industry, what should B2B energy suppliers and energy brokers do?
Place compliance at the heart of the business
For these organisations, the first step is to extend duty of compliance with regulation beyond just the regulatory team. Businesses that place all responsibility for regulatory compliance on the small, often hard-pressed team of regulatory experts, are asking for trouble. Ensure accountability for compliance is clearly assigned to the commercial and operational leaders of the business. Watch out for, “I don’t know the regulations, that’s the job of the regs team”. Regulations team can support but compliance is achieved by the day-to-day operations of the business being aware of the rules and having processes and controls designed to stay within them.
Know your weak spots
The second step is to regularly conduct internal evaluations of compliance with both the letter, and the spirit of regulations. Make sure each regulation has an owner, a “how-we-comply statement” and the controls that provide the evidence to managers that all is well. Tell-tale warning signs include, “I know what the regulations say, but they don’t really mean it.”
Third, is to listen to stakeholders; customers, partners and the regulator. Look out particularly for customer complaints not being taken seriously by internally by the organisation and dissatisfied stakeholders who are written off as, “never being happy”. A key tenet of Ofgem’s role is to protect consumers, so stringent attention to customer satisfaction metrics, and timely complaint remediation are as important from a compliance perspective as they are for customer service and retention. If customers and stakeholders sound unhappy, suppliers and brokers should be concerned.
It can be a demanding to successfully manage the complexities of energy regulation. Clear accountability, continuous evaluation and proactively listening to stakeholders are all no-regret investments that for professional and well-run B2B energy suppliers and energy brokers.