Tips to Help Small Business Owners Navigate the Energy Market

August 4, 2023

Tips to Help Small Business Owners Navigate the Energy Market

Small businesses rely on access to affordable and reliable energy suppliers to run their business smoothly. Unfortunately, they often encounter issues and disagreements with energy providers that can hinder their business operations. The Alternative Dispute Resolution (ADR) scheme is a useful resource introduced by Ofgem to help small businesses deal with any unresolved disputes as fairly and impartially as possible.

Run independently by the Ombudsman Services, the ADR scheme provides small and micro businesses fair, efficient, and cost-effective ways of resolving disputes. This guarantees that complaints lodged by small businesses are addressed, and your rights are upheld through the ADR scheme. This article examines the ADR scheme and how it can help your small business resolve disputes.

Key Takeaways on Navigating the Energy Market

  1. ADR Scheme Benefits: The ADR scheme introduced by Ofgem helps small businesses resolve disputes with energy suppliers fairly and impartially, ensuring their rights are upheld and complaints are addressed efficiently.
  2. Third-Party Intermediaries (TPIs): Energy suppliers are required to work only with registered TPIs or brokers, resulting in improved and equitable energy contracts for small and micro businesses.
  3. Various ADR Methods: ADR includes mediation, arbitration, and negotiation as effective means to resolve disputes outside the traditional court system.
  4. Micro Business Definition: Ofgem classifies businesses as micro if they have fewer than ten employees and an annual turnover of no more than £2 million or specific energy consumption levels.
  5. Broker Fee Transparency: Micro businesses gain access to information about broker commission fees before signing contracts, ensuring decisions are made fairly with full knowledge.
  6. Right to Switch Providers: Small businesses can switch to a new energy provider without notice after their contract expires, promoting flexibility and competition in the energy market.
  7. Market Information Accessibility: Ofgem and Citizens Advice work together to provide small businesses with easily accessible market information, ensuring they are well-informed about their rights and market operations.
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What is the TPI Alternative Dispute Resolution Scheme?

Energy suppliers are only allowed to work with Third Party Intermediaries (TPIs) or Brokers registered with the scheme, according to a mandate from Ofgem that took effect on December 1st, 2022. This means improved and more equitable energy contracts for small and micro businesses.

For small businesses, understanding alternative dispute resolution is crucial should you ever encounter an unresolved dispute with an energy supplier. Alternative Dispute Resolution (ADR) refers to various methods and procedures for resolving disputes outside the traditional court system. 

ADR modes frequently used include:

  1. Mediation: A dispute between two parties can be resolved by helping them reach an amicable agreement. The mediator aids the two parties in communicating and negotiating effectively while remaining impartial and refraining from imposing any decisions.
  2. Arbitration: In arbitration, the disputing parties make their cases to an arbitrator or panel of arbitrators, who then renders a binding decision. The arbitrator's decision is still legally binding even though arbitration is sometimes less formal than court proceedings.
  3. Negotiation: The parties engaged in a negotiation seek to settle their differences without the involvement of a third party through open dialogue and an effort to understand one another.

How Does The ADR Scheme Help Small Businesses?

The ADR Scheme applies to all Third Party Intermediaries (TPIs), energy brokers, and consultants who offer a service to small and micro businesses. A micro business is defined as follows by Ofgem:

If a consumer is not a domestic user, they are classified as a micro business if they meet one of the following criteria: 

  • Having fewer than ten employees (or their full-time equivalents) and a balance sheet or annual turnover of no more than £2 million.
  • No more than 100,000 kWh of electricity are used annually.
  • Or they use no more than 293,000 kWh of gas annually.

Let’s look at how can the ADR scheme help your small business:

Broker Fee Transparency

As a result of the rules set out by Ofgem, microbusinesses will now have access to information about broker commission fees before signing a contract. Additionally, energy providers must include the fees once business customers have accepted the terms and received their contract packet. Micro businesses will gain from the new rule of broker fee transparency, and it will also ensure that decisions are made fairly and with knowledge.

The Right to Switch Without Notice

Secondly, your small business can switch to a new energy provider without notice after your business contract expires. However, you should also be aware that by switching suppliers before your energy contract expires, your energy provider might charge you an exit fee. 

Increasing Market Information Accessibility

Lastly, Ofgem and Citizens Advice are working together to ensure that small businesses always know their rights by offering them easily accessible information on how the market operates. Access to market data for small and micro businesses is readily available.

When To Lodge A Complaint to the Energy Ombudsman Using ADR Schemes

A business can complain to the Energy Ombudsman if their issue has not been resolved. It is advised to attempt a direct resolution with the energy provider first, though, before taking the matter to the Ombudsman. A complaint should be resolved satisfactorily through direct communication; if not, you can file a complaint.

You can file a complaint with the Energy Ombudsman if it has been eight weeks and you are still not happy with the response from your energy provider. If you have a complaint about your energy service, you must notify your energy provider within 12 months of the unresolved issue.

The Ombudsman will then only take your complaint into account if one or more of the following apply:

  • You are having some difficulties complaining to your energy provider. Ensure that you elaborate on the problem you're having. 
  • You've complained to your energy provider for the past eight weeks but are still unhappy with how your complaint has been handled. If so, you may file a complaint with the Ombudsman within the recommended time frame.
  • You have six months to escalate your complaint to the Ombudsman if your energy supplier has sent you a "deadlock" letter indicating an agreement cannot be reached. A "Deadlock Letter" is a company's response to a customer or that customer's representative in which the company either rejects the complaint or makes no indication that it will be given further thought.

You must provide the Ombudsman with all the relevant information regarding your complaint. They will better comprehend the situation and make a just decision. The ADR scheme may take some time to resolve disputes, so it's essential to be patient and avoid getting into pointless debates.

Final Thoughts

Understanding your legal obligations as a business energy consumer and how the ADR Scheme can help resolve any disputes with your energy supplier is essential. The program provides a fair and unbiased process for handling complaints that cannot be resolved directly after contacting the energy supplier. 

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