As CGA by NIQ And Alixpartners release new market information today that show 1 in 18 licenced premises have closed in the last year – over 5,500 venues across the UK – energy regulator Ofgem has also announced its review on energy reforms across a series of reports.
Ofgem say in the non-domestic energy report that ” We have received numerous reports that the non-domestic market is not delivering to our expectations: with accounts of customers struggling to contract with energy suppliers, poor customer service, and larger price hikes than seem necessary. We are determined to investigate poor behaviour in the non-domestic sector and hold suppliers to account. To help us take the right actions, we needed to identify if issues are temporary, or supplier specific, or whether they show more systemic market issues that may need a deeper market investigation or changes to our rules.
“We have issued intensive supplier information requests, a Call for Input and undertaken extensive stakeholder engagement to gather information and inform our views. Overall, while the evidence suggests that some of the issues consumers have faced are driven by challenging market conditions, we have identified clear cases of poor conduct by specific suppliers. We also believe there are specific areas where rule changes are needed, and we are proposing targeted reforms to ensure suppliers across the board raise the bar to deliver better customer support.
“We also are asking government to consider making changes to regulation, where we do not currently have vires to intervene or change regulation. This includes wider access to redress support and matters relating to energy brokers. Some domestic consumers do not contract directly with a supplier, but with a third party, such as a landlord or mobile park owner who has agreed a non-domestic contract. We will work with government to get these customers more support.
“It is also the case that sectors that are perceived to carry more risk, such as hospitality, are not yet seeing better outcomes. Consideration of the economic outlook for this sector, to which risk perceptions are linked, is outside the scope of Ofgem’s review.” You can download the full report here.
The Non-domestic Energy Market Review has been called for across Industry bodies for some time and Kate Nicholls, CEO UKHospitality said today, “Ofgem’s market review is extremely welcome, as energy continues to be a critical concern for hospitality businesses. It’s great to see that our ongoing campaigning has been acknowledged and that action is being taken to provide some much-needed support.
“By opening up new channels of communication, extended protections and more guidance, businesses across the industry can benefit from levels of support that simply have hitherto been lacking.
“UKHospitality has continued to raise the reckless behaviour of some energy suppliers with Government, with some offering rates well above wholesale prices, hiking standing charges, demanding eye-watering deposits, and, in some cases, refusing to work with hospitality companies. A recent member survey shows that energy costs are up 80% year-on-year and almost half of businesses who signed a contract at the peak of the energy crisis fearing their business is at risk of failure.
“Whilst it has been a long time coming, it is reassuring to see that Ofgem is now doing what it can to support the hospitality sector.
“Energy companies must be held to account, and we are committed to continuing to work with Ofgem and Government to ensure the market is future-proofed. The recommendations in this review must be actioned urgently, as delays could lead to further business failures – of which there have been a significant number.”
The NTIA have also criticised the Government for not reacting fast enough to the energy crisis. Michael Kill CEO NTIA said, “While these proposed reforms are seen as a step forward, they will not provide immediate relief to the thousands of businesses within the sector who are facing further anxiety each time they receive an energy bill.”
“Some of the main concerns for businesses in the hospitality and night time economy is the issue of overzealous security deposits, unsubstantiated rates based on risk and the withdrawal or refusal of energy supply. These practices are still prevalent and are causing significant worries for businesses in these sectors.”
“In particular, mentioning the hospitality or night time economy to energy suppliers or brokers at the point of engagement can lead to higher charges, sometimes up to 15% more than our retail counterparts pay, or even result in a complete inability to obtain energy supply.”
“This has created a considerable loss of confidence in the energy sector, as businesses feel that suppliers have taken advantage of the vulnerability of these sectors.”
“Additionally, the government’s response to the energy crisis has been perceived as slow and inadequate, with the crisis already lasting for over a year and a half, and seemingly no end in sight.”
“An especially challenging aspect for the hospitality and night time economy is the perceived lack of support for non-domestic supply. While domestic supply appears to have received some level of assistance, the non-domestic supply has been limited, leaving many businesses in these sectors to fend for themselves, and resulting in some cases in business closures.”
“Overall, the situation in the energy sector remains concerning for businesses, and there is a strong need for comprehensive and immediate measures to support and stabilise the energy market for all sectors.”
Neil Lawrence, Director at Ofgem, said, “Suppliers are short-changing too many of their customers, who deserve better. Customers need more support when they are struggling and should be able to contact their supplier without frustration or undue delay when they need help.
“The plans we are announcing put the welfare of business and domestic consumers first and set out a comprehensive package to tackle poor behaviour by energy suppliers.
“Good customer service is important for all consumers, but it can make a critical difference to welfare and the safety of the most vulnerable.
“While we have seen good practice from some suppliers, we expect every company to raise the bar to provide a consistent service that customers can rely on – and this mission should be driven from the top.
“We believe these recommendations can make a positive difference to consumers and we aim to have changes in place before the cold winter months return.”
The reforms will be released in several publications by the regulator covering the following subjects:
- Non-Domestic Market Review (Business Market Evaluation)
- Consumer Standards Statutory Consultation
- Minimum Capital Requirements for supplier finances
The non-domestic review consultation documents can be downloaded here