Is broker self-regulation working in 2021?

For the time being energy brokers are unregulated. As a result of that sometimes customers are given poor value gas and electricity contracts. Moreover, some brokers only present deals from a few selected providers hoping to make a profit on the commission these suppliers offer them. Customers who are not careful can end up being locked in bad deals for many years. That’s why energy brokers have been talking about regulating their services. This piece outlines what various regulations are in place now and what are the new proposed measures. The goal of putting new rules in place is to protect customers from being cheated by energy brokers. Moreover, regulating brokers will bring structure and regulation to the industry making it more effective for all parties involved.

What is the Third Party Intermediary (TPI) Code of Practice?

Broker self-regulation

TPI Code of Practice was designed for Third Party Intermediaries who represent small and medium-sized businesses. To offer them the best energy deals they cooperate with suppliers and negotiate the best prices and conditions of the contract.

If brokers agree to follow the rules of the Code of Practice they commit to providing service that is high-quality, honest, and transparent.

The Code of Practice can be described as a set of standards that aim to protect businesses and make sure they are being treated fairly. The Code of Practice was introduced because TPIs aren’t regulated by Ofgem. TPIs that do not respect the standards outlined in the Code of Practice will be removed from it.

It is important that before a business decides to work with a certain energy broker, they check whether they can be trusted. A list of TPIs that participate in the Code of Practice can be found here. If a broker does not comply with these rules, there is no way of knowing if they are trustworthy and you might be at risk of getting a bad energy deal.

Principles of the Code of Practice

The Code of Practice is built on four principles that aim to protect the interests of businesses that buy energy products. These principles are:

  1. Contracts need to be understood by clients.
  2. Contracts need to be fully accurate and complete.
  3. Contracts need to be presented in a professional manner.
  4. Contracts need to meet the individual needs of each customer.

What does the Code of Practice regulate?

The Code of Practice regulates many aspects of the functioning of energy brokers. An overview of the main ones can be found in the table below.

Code of Practice requirements
Staffbackground checks
regular training
performance assessments
Identitystaff needs to identify themselves when you contact them
Honestyno hidden information in energy contracts
Letter of Authoritycustomers need to sign a Letter of Authority that allows the broker to act on their behalf when contacting energy suppliers
Clear contractsall elements and conditions of the energy contract need to be presented and explained to the customer
Privacybrokers need to adhere to the Data Protection Act brokers cannot share customers’ data with other parties
Complaintsdesignated system for handling complaints
Escalationthe Independent Code Manager will handle situations where a customer is not happy with the broker’s resolution to their complaint
Auditsbrokers will be audited at least once a year to see if they comply with the Code
if they don’t they can be fined or suspended from providing their services

If you want to read the full TPI Code of Practice click here.

Advantages of TPI Code of Practice for customers

The Code of Practice has been introduced with customers in mind. Thanks to it the customers can enjoy several advantages. That includes: 

  1. Great Customer Service – you can be sure that the broker’s staff is highly trained and will provide you with all the information you need. If you ever have any questions they will be able to answer them.
  2. Freedom of choice – brokers won’t be using any special sales tactics and try to force you into signing a contract. They will present you with the best available deals and help you make an informed decision.
  3. Full transparency – brokers will provide an honest service and you will be fully informed about each step of the process of getting you an energy deal. Moreover, you can be sure that there will be no hidden information on charges in your contract.
  4. Protection of privacy – brokers need to follow the Data Protection Act so you can be sure your personal information is protected. No one except for the brokers can see your data without your consent.
  5. Best prices – you can be sure that the broker reviews all the available tariffs and presents you with the ones that have the most competitive prices. Brokers that follow the Code of Practice will help you save money on energy and will let you know exactly how they are paid.
  6. A high degree of security – you will have to review the deal and express your consent for the energy contract to go ahead. Before a broker can start negotiations with energy suppliers you will need to sign a Letter of Authority that gives them permission to represent you.

Ofgem’s proposal

For now, Ofgem does not regulate the functioning of the energy brokers. Nevertheless, it came up with a number of proposed measures that the brokers could implement. These include:

  1. Broker conduct principle – certain requirements for suppliers would be introduced to make sure they only work with trustworthy brokers
  2. Broker dispute resolution – suppliers should only work with brokers that joined an alternative dispute resolution scheme
  3. Informed contract choices – sales and marketing rules would be applied to both suppliers and brokers
  4. Broker commission transparency – existing supply licence obligations would be expanded so that customers can check information about how brokers get paid and what their expenses are
  5. Cooling-off period – small businesses would have 14 days to cancel their energy deal without any charges
  6. Contract extensions – while the process of switching to a new contract, suppliers should keep the existing energy rates for up to 30 days
  7. Banning notification requirements – micro-businesses would no longer be required to provide notice of wanting to switch