Section 1 – INTRODUCTION
At the end of March, Ofgem announced that Ombudsman Services will become the Alternative Dispute Resolution provider for the New Energy Broker Scheme. The announcement came after Ofgem spent 18 months conducting the ‘Microbusiness Strategic Review’ with the goal of improving the experiences of microbusiness customers and helping them get more competitive deals. At the end of working on the review, Ofgem decided that UK energy suppliers will only be able to work with brokers that signed themselves up to an approved dispute resolution scheme. That means that for energy brokers to be able to keep selling energy contracts to customers on behalf of energy suppliers, they need to join the scheme and have their names added to the register.
Ombudsman Services explain that, ‘“Energy broker” means an organisation or individual that, either on its own or through arrangements with the other organisations or individuals, provides information and/or advice to a Micro Business Customer about the energy supplier charges and/or other terms and conditions and whose payment for doing so is made or processed by the energy supplier.’
It is worth clarifying that under the scheme only microbusinesses can make complaints about a broker to Ombudsman Services. Domestic customers are not covered by it. To qualify as a microbusiness, an energy-consumer has to have:
- An annual consumption of electricity of not more than 100,000 kWh, or
- An annual consumption of gas of not more than 293,000 kWh, or
- Less than 10 full time employees and an annual turnover of not more than €2 million.
What does Ombudsman Services do?
Ombudsman Services is a not for profit organisation specialising in providing independent dispute resolution services in the energy industry. It has been working with energy companies and brokers for the last two decades. Ombudsman Services’ main mission is to ensure that businesses treat its customers fairly and that, in the event of a dispute, both sides reach a reasonable outcome. Thanks to Ombudsman Services complaints are dealt with as quickly as possible.
Ombudsman Services is independent and impartial and it comes up with solutions to a dispute after carefully analysing the case and taking into consideration rules and regulations. To make sure that Ombudsman Services understands the nature of disputes that often occur between brokers and businesses, the organisation has been engaging with suppliers and other actors operating on the energy market.
As for the launch of the scheme, Ombudsman Services has been working in close cooperation with Ofgem to ensure that the registration process and making the scheme go live go as smoothly as possible.
Ombudsman Services also has wider impacts when it comes to informing policy and addressing a wide range of issues related to the energy industry. In addition to solving disputes in the energy industry, Ombudsman Services has also been offering services in the communication and parking sectors.
Timeline
The chances introduced by Ofgem cannot be implemented in a matter of days. The process will happen over a few months, giving energy brokers enough time to understand what the changes are and to undertake the necessary steps to join the scheme.
Ombudsman Services and Ofgem agreed on a four phase timeline:
- 26 April – 31 August – registration window for brokers
- October – notifying brokers about them being accepted into the scheme, as well as invoicing
- November – adding brokers to the scheme register
- 1 December – the scheme goes live.
If you are an energy broker, you should familiarise yourself with the timeline and initiate the registration process as soon as possible. This way you will be able to avoid delays that could have a negative impact on you providing invaluable services to business clients.
After you successfully register, you will be added to the register. ‘We will maintain a register of the brokers who have joined our scheme which will be made available on our website. The register will be publicly available and will allow suppliers to identify whether a broker firm has signed up to ADR to inform their decision as to whether to work with the firm. If a broker firm is expelled from the scheme, they will be removed from the register,’ Ombudsman Services explains.
What do I need to prepare to register?
To register for the scheme, you have to submit an online application form available here. Before you do it, you should prepare the following documents:
- Your Company Complaint Procedure
- A copy of the signed Deed Poll (available in the web page where the application form is)
- Your approval for the Data Sharing Agreement (also available where the application form is).
If you are a Sole Trader, you also have to prepare a copy of your photo ID and proof of your National Insurance Number.
What are the costs?
Ombudsman Services is a not-for-profit organisation so energy brokers that join the scheme need to pay fees to cover the costs of providing dispute resolution services. For the moment, the costs are as follows:
- £300 for annual membership subscription
- £340 per case for case fees
- £170 per case for reduced case fees when using Facilitated Case Resolution.
To be able to continue selling energy contracts to microbusiness customers, brokers have to join the scheme. Ombudsman Services will not only provide impartial resolution services but will also help brokers improve the quality of the services they offer.
Can I be removed from the scheme?
It is possible for an energy broker to be expelled from the scheme in the following circumstances:
- A broker fails to pay the fees for their annual subscription
- A broker fails to pay complaint fees
- A broker refuses to implement solutions suggested by Ombudsman Services or is often late in implementing them
- The complaint handling procedure that the broker adapts does not adhere to the standards set out by Ombudsman Services
- A broker is rude to the staff of Ombudsman Services
- A broker is rude to customers making a complaint.
If you get expelled from the scheme, you will immediately be removed from the register and you will no longer have the right to work with energy suppliers and sell customers’ energy contracts on their behalf.
Section 2 – SCHEME DETAILS
Here we go in detail into what Ombudsman Services is and how the scheme works to make sure you understand it and have access to all the key information.
Principles of the Alternative Dispute Resolution Scheme
The Alternative Dispute Resolution Scheme is based on the following principles:
- Ofgem introduced a condition stating that suppliers can only work with brokers that sign up to an approved ADR scheme
- The ADR scheme relies on the services of Energy Ombudsman
- The scheme is funded by energy brokers through various fees
- The scheme was developed based on the findings of Ofgem’s microbusiness strategic review
- After one year the effectiveness of the scheme will be reviewed.
- The process of implementing changes will take between 6-8 months.
The scheme is focusing on microbusinesses as they represent an important part of the retail energy market. The expenditure of the bigger ones adds up to £4.2bn in 2021. In recent months, microbusinesses have been facing a number of challenges linked to the pandemic and the ongoing energy crisis. This is why the scheme aims to provide microbusinesses with a protection framework.
As Lexology explains, Ofgem aims to implement changes in the following areas:
- Disclosing Third Party Cost information
After the changes are introduced, suppliers will be required to make sure that Principal Terms are presented to microbusinesses before and after signing the contract. They need to be informed of any brokerage costs.
- Working only with brokers who are part of an approved alternative dispute resolution scheme
Under a new supply licence condition, suppliers will be able to work only with brokers that sign up to a qualifying ADR scheme. So, brokers who fail to join the scheme will not have the right to sell energy contracts to customers on behalf of suppliers.
- Not being able to require microbusinesses to give notice if wanting to switch
Suppliers will be prohibited from requiring microbusiness customers to submit a notice prior to ending their contract and switching to a different supplier. That does not apply to Evergreen Contracts, which are contracts that automatically renew unless a party concerned provides a notice ending it.
- Offering more information and guidance on the functioning of the energy market
Ofgem aims to make sure that microbusinesses have more awareness of how the energy market works and what their rights and obligations are.
Overview of the activities of Ombudsman Services
Ombudsman Services has been operating as a non for profit organisation since 2002. It has offices in the northwest of England and is based in Warrington. Ombudsman Services’ mission is to build, maintain, and restore trust in the energy sector and to increase the satisfaction of customers.
Ombudsman Services can resolve up to 60 000 cases a year in the energy sector, more than 20 000 in communication, and as many as 89 000 appeals in parking. Thanks to the help of Ombudsman Services, things can be improved quicker and more efficiently than when trying to solve disputes another way.
The impacts of Ombudsman Services reach beyond handling complaints, however. The organisation also offers data and insights that might be useful to a wide range of stakeholders operating in the energy industry. It also helps shape policies and offers advice to policy makers and consumer organisations.
The guiding principle that Ombudsman Services has is that in each of its schemes, companies that sign up have to fund these schemes. So, if Ombudsman Services provides assistance to energy brokers in a scheme intended for brokers, they need to pay fees to belong to the programme. This is why joining the new Alternative Dispute Resolution Scheme is not free.
Onboarding process
In Section 1 of this guide you can find a timeline for joining the scheme. Here you can get more details regarding the onboarding process that involves three steps:
Step 1 – Application
To apply, you need to fill out the form and upload a number of required documents that include:
- Deed poll
- Complaint Handling Procedure
- Proof of identity
- Proof of Insurance (for sole traders).
You also have to review and express your agreement to the Data Sharing Agreement and Terms of Reference (TOR).
Finally, you need to pay your fees. You will be required to do that in October.
Step 2 – Onboarding
After you successfully apply to the scheme, you will receive a welcome pack, which will feature the following information:
- Your Unique Membership Number
- Welcome Letter
- Explanation of the complaint procedure
- Logo of Ombudsman Services
- Links to websites where you can find key information about the scheme.
You will also receive an invitation to Dispute Resolution Platform (DRP) training.
Step 3 – Operations
You will have to attend Dispute Resolution training during which the following will take place:
- User activation
- Review of broker case files
- Broker remedy implementation.
During each step of the process, you will have access to expert guidance and assistance. If you have any questions, Ombudsman Services will be around to offer advice and clear your doubts.
Funding of the scheme
In Section 1 we explained what fees you will have to pay to join the scheme. Here we explain these costs in more detail and we provide an insight into how the scheme’s funding model works.
| The funding model | Fees |
| The funding model for the ADR scheme is based on the following principles: Ombudsman Services operates on a not-for-profit basisOmbudsman Services aims to propose fair fees and not overcharge those participating at the scheme The scheme is funded by members of the scheme | Fees are necessary for Ombudsman Services to cover its costs. The total cost of participating in the scheme will be a combination of subscription fees and case fees. In year one members will have to pay: Subscription fee of £300 per memberCase fees of £340 for each case going through the whole complaint process with Ombudsman ServicesReduced case fees of £170 if a resolution is reached early without the case going through the whole process. |
Next steps checklist
- Familiarise yourself with the application process
- Check the timeline
- Submit a copy of your Complaint Handling Procedure
- Sign and return the deed poll
- Sign and return the data sharing agreement
- Review the Terms of Reference
- Review all the documents.
Make sure to submit your application as soon as possible to allow enough time for the processing of your application.