New threshold for businesses accessing the Energy Ombudsman
Download the full outcome
Detail of outcome
This consultation proposed a new definition for small businesses, alongside the existing microbusiness definition in the Gas and Electricity Regulated Providers (Redress Scheme) Order 2008.
The new definition builds on a combination of 3 thresholds, specifically the number of employees, annual turnover, and energy consumption levels, covering entities with:
- fewer than 50 employees or their full-time equivalent, AND an annual turnover of at most £6.5 million or a balance sheet total of £5.0 million
OR
- an annual electricity consumption of not more than 200,000 kWh (revised from the originally proposed 500,000 kWh)
OR
- an annual gas consumption of not more than 500,000 kWh
The implementation of this new definition will need changes to secondary legislation through a Statutory Instrument (SI), which we will pursue at the earliest opportunity in the parliamentary session. Subject to Parliamentary approval, we intend to opt for the effects of any change to come into force by Winter 2024.
We estimate that extending access to redress to small businesses will include approximately 4% more of the UK business population, totalling an additional 200,000 businesses alongside microbusinesses, meaning that 99% of businesses will be able to seek redress.
We will review this 12-18 months after implementation to assess the effectiveness of the thresholds and consider further expansion of access if necessary.
We will also work with Ofgem and industry professionals to develop a guidance document covering:
- eligibility information
- frequently asked questions
- roles and responsibilities for suppliers and customers
Detail of feedback received
We received 36 responses to this consultation, which were largely supportive of the proposal, including from:
- energy suppliers
- consumer groups
- Third-Party Intermediaries (TPIs)
- businesses
- industry groups
Original consultation
Consultation description
We want to ensure that all relevant businesses have access to redress against their energy supplier, without having to rely on the courts. This consultation seeks views on a proposal to amend the Gas and Electricity Regulated Providers (Redress Scheme) Order 2008 by expanding access to redress to include small businesses.
We would like feedback, particularly from those directly impacted by the potential change, to ensure that:
- our proposed expansion is sensible
- the language is clear
- the new thresholds are set at the right level
We support Ofgem in ensuring a well-functioning market for non-domestic customers, including implementing the recommendations from their recent non-domestic energy market review at pace.
At present only businesses with a non-domestic energy contract that meet the definition of a relevant consumer (referred to by Ofgem as microbusinesses) can access the Energy Ombudsman to acquire dispute resolution assistance between them and their energy supplier.
The Ofgem review concluded that more businesses would benefit from access to dispute resolution through the Energy Ombudsman. The Ombudsman provides a free and impartial service to consumers who have raised an issue with their supplier which could not be satisfied.
Although pursuing legal action through the courts is available to all businesses, many of them don’t have the necessary resources, especially small businesses. The Legal Services Board Survey 2021 highlighted that half of small businesses sought to resolve their legal issues entirely on their own or took no action at all.
This consultation sets out proposals to:
- introduce a new small business definition into the 2008 Order
- expand access to redress to businesses with up to 50 employees AND
- an annual turnover of £6.5 million or a balance sheet total of £5 million OR
- an annual electricity consumption level of 500,000kWh electricity OR
- an annual gas consumption level of 500,000 kWh gas
Introducing a new threshold to access and seek redress through the Energy Ombudsman to include small businesses would encompass a further 4% of the UK business population, combined with microbusinesses. This would bring the total percentage of businesses who can seek redress to 99%, which represents at least an additional 200,000 businesses in the UK.
The consultation is open to anyone to respond, but will be of particular interest to:
- energy suppliers
- consumer groups
- industry bodies
- business organisation representatives
- think tanks
Documents
Last updated 5 April 2024 + show all updates
-
Summary of responses published.
-
First published.