Citizens Advice response to Ofgem’s Third-party Intermediary (TPIs) Market Review
Citizens Advice response to Ofgem’s Third-party Intermediary (TPIs) Market Review 420 KB
Citizens Advice welcomes the opportunity to respond to Ofgem’s market review of Third-Party Intermediaries (TPIs). Regulation of TPIs is necessary, due to the ongoing detriment which is occurring in the TPI market. Many TPIs act with transparency and make things easier for consumers, but the lack of rules and regulations in this market mean that service is very inconsistent between different TPIs of the same type. Ofgem has a unique opportunity to design an authorisation regime for an increasingly important segment of the energy retail market which is both forward-looking and suitably flexible. TPIs play a key role in the energy retail market, and will only become more important as we transition to cleaner energy.
However, poor practice by some types of TPIs, such as energy brokers, which are still essentially unregulated, is causing consumers considerable harm. This can negatively impact growth, as well as the ability of consumers to engage with innovative technologies. We are keen to work with Ofgem to support the development of this workstream as it continues. In order to design a successful authorisation regime which achieves good outcomes for consumers, Ofgem should prioritise the following areas:
Minimum requirements; all TPIs should be able to demonstrate that they can meet minimum requirements to operate in the energy retail market. This could be modelled upon Ofgem’s existing conditions for energy suppliers, as well as the FCA’s Threshold Conditions which brokers must be able to meet. Examples include fit and proper persons requirements, financial resilience tests, customer service and operational capabilities. These should be proportionate to the level of impact a TPI can have, so that TPIs which may end up functioning similarly to suppliers in terms of day-to-day control over a consumer’s energy supply are subject to closer oversight and higher threshold conditions.
Registration requirements; In order to ensure the removal of bad actors from the market, Ofgem should introduce a registration process for TPIs which enables identification of repeat offenders, and enforcement action to be taken where appropriate. This could also take the form of a publicly available list of registered TPIs for consumers to access. Access to this will support consumer confidence when using TPIs, and enable good functioning of advice services.
Transparency and clarity; Ofgem should introduce regulation requiring that TPIs act transparently when they are working with consumers. This transparency extends to commission disclosure, contract terms, identification and accurate representation of authorised activities.
Continuous monitoring; monitoring of the TPI market by the regulator and an independent consumer advocate. This will enable the early identification of detriment to consumers, as well as the basis for ongoing monitoring of the appropriateness of rules which TPIs must follow.
Clear route to independent redress and advice; Ofgem should develop a clear complaints process which TPIs are obliged to follow, to enable consumers to feel confident to raise a complaint against their TPI and know how to access an Alternative Dispute Resolution (ADR) scheme. Ofgem should consider how best TPI consumers can be signposted to independent advice, and how suppliers and TPIs may communicate this clearly.
Swift, proportionate enforcement; when something goes wrong, Ofgem should act quickly and proportionately to put things right. When a TPI breaks the rules, Ofgem should work closely with them to rectify the situation.
We recognise that Ofgem is moving to a consumer outcomes based framework of regulation. We are supportive of this work, but would emphasise that TPI consumers are put at particular risk in the current market, due to the issues we highlight below. As such, some prescription-based regulation will be necessary in order to raise and set standards in the market. Prescription-based regulation can drive improvements in the market as well as tackling harms to consumers, such as enabling the use of shared data standards across the market, which will help different aspects of industry work better together. We look forward to continuing to engage with Ofgem as it develops its framework for authorising third-party intermediaries.