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TPI Code of Conduct

22nd May 2014

TPI Code of Conduct: How does it affect customers and consultancies?

The consumer is paramount for any business to survive, with the energy industry being put into the public eye; scrutiny of the industry is a talking point that’s not going to go away. Business consumers have lost trust in the energy industry but how can Ofgem and Third Party Intermediaries improve on those issues?

TPIs are energy brokers or consultants who work on behalf of a commercial energy user. They allow for a better understanding of the market and potential supplier problems. They save businesses time and hassle, and get the best deals available but will also keep on top of key contract dates, providing a reminder to the business when the contract renewal is due. It can be an invaluable service to businesses that may not have the resources to employ someone specialised in this area.

However, Ofgem’s latest research discovered that around one third of small businesses in the UK believed brokers and consultancies weren’t always upfront about the costs passed onto them as a consumer and that it wasn’t transparent enough. Before that, previous research had also shown that firms were concerned about cold calling, high pressured selling tactics and “unprofessional behaviour” of some TPIs.

With this in mind, the broker or consultant should be looking to do their best on behalf of the client. Hence the call for a code of practice for energy consultancies and brokers to sign up to, which will force bad practices out of the industry and a feeling of trust back into the consumer.

Consultancies and brokers who hold themselves to account have called upon the watchdog to listen to what they think is best for the industry moving forward, for their benefit and the customers, with Ofgem calling on those businesses to give their input into what’s best for the future of regulating in the business-to-business sector.  

The energy regulator at present can stop consultancies and brokers from using misleading marketing tactics and apply to court for an injunction to make sure that anyone who does use underhanded tactics has the book thrown at them to make sure that they comply with legislation.

Ofgem want to take things further by proposing to make it a licence obligation for suppliers to only work with TPIs who are accredited to an industry-governed code of practice.While many have been calling for the introduction, others in the industry have suggested an official code of conduct could mean that brokers will be licensed like suppliers with their concerns being that this approach, if too rigorous and costly, could cause a lack of competition.

However, the call from both the energy industry and the consumer comes because without a code of practice, the trust lost could affect the TPI’s business further with a reduction in competition and choice for the consumer, which could discourage them from engaging with the market resulting in consumers making poor choices.

Brokers and consultants have until Monday 30 June 2014 to give Ofgem their opinion on regulating TPIs in the business-to-business sector.

There are several ways that Ofgem are looking at regulating the industry, making sure that at each point the issues are assessed from the TPI and consumer point of view. The option that are being considered are to put in place a voluntary code of practice, a code of practice pinned by licensing conditions that suppliers use to show accreditation or a direct licensing of TPI’s with the introduction of legislation and independent board to adjudicate behaviour.

Each has their benefits and disadvantages.

The voluntary code would ask for people to sign up making it accessible to all those who follow good practices, meaning it would fail to capture those TPIs who harm the industry and the trust of consumers, with limited powers to tackle poor behaviour.

The licensing option will be imposed by Ofgem, to make it so that suppliers only work with licensed TPIs who follow the code and meet the requirements needed. This is likely to inspire greater consumer confidence but the cost of the licence could mean that charges may get passed from the broker or consultancy onto the consumer.

The final solution is one of a mandatory nature under this option TPIs would not be able to operate in the market without a licence from Ofgem. Which will make enforcement more robust, giving consumers reassurance that those brokers and consultants who don’t follow the code of conduct are accountable, with proceedings monitored by a governing body who would be independent  to further enforce the credibility of rulings. Ofgem would apply to the government to make TPI activities licensable on the grounds that it’s of interest to the consumer.

This could have the biggest impact of the options but it would be the most resource intensive measure and would take a long time to implement due to applying to government for the powers to enforce. This slow process driven approach would mean that current issues would not be addressed for some time and the costs to do so would be placed on those TPIs who would have to buy licenses, meaning some small scale TPIs who are offering excellent service and goods, may be frozen out of the market, with the potential costs then having to be passed onto the consumer.

It’s an interesting time for TPIs and energy consumers, with the main focus being on improving the industry for the benefit of the end user. With energy brokers and consultancies putting in their input, the end result will take into consideration all scenarios to make sure that TPIs – big or small – come to a conclusion which will restore faith for customers and competition within the industry.

By setting clear standards for the TPI code of conduct the cowboys and misleading sales tactics that tarnish the industry will be eradicated, putting an end to existing and potential problems in the future.

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