Rogue practice must be stamped out

Surveyors, construction companies, architects and financiers are all regulated to ensure quality and prevent malpractice within the real estate industry. However, hundreds of millions of pounds are spent on energy each year through third-party intermediaries (“TPIs”), with zero regulation on the companies providing energy procurement advice. To protect landlords, agents, and tenants, this has to change. The role of a TPI The term TPI can cover energy consultants, energy brokers or simply price comparison websites, all of which have a similar goal: to identify the most appropriate energy contract for each client, with an emphasis on cost and contract terms. This should ensure a more competitive price than could be achieved by end users on their electric and gas spend. Industry-leading TPIs have also included additional services for clients such as consumption reporting, billing validation, environmental reporting compliance and tenant recharging. A good TPI should therefore be providing a very valuable service that not only saves their client money but ensures minimal input. Why then, according to Ofgem, are 31% of businesses so unhappy with the involvement of a TPI? (https://www.ofgem.gov.uk/sites/default/files/docs/2013/12/non-dom_quant_final_for_publication_18_12_13.pdf page 7). Rogue TPIs It is clear that some “rogue TPIs” are not acting in the best interest of the end client and are instead taking advantage of a complicated system that currently has little transparency and is unregulated. Working within the industry, it is evident that large commissions are being taken and high pressure sales techniques are being deployed forcing clients to accept inappropriate and inflated contracts. There are also instances of complete misrepresentation where an end user is having their energy supply switched without any knowledge of who authorised the switch and why it has been done. This is not only unacceptable for those that suffer directly, but it is also causing a lack of trust in the industry as a whole. While a “good” TPI should be seen as a valuable asset to an organisation, it is all too common that those who would benefit the most from a trustworthy TPI are actually the most likely to fall victim to, or even bypass a TPI completely, due to this lack of trust. The end result is the same: a less competitive price with a more onerous end result for any reporting or contract management that is required. Regulation: the positives and the barriers Mandatory regulation is therefore a necessity. If it was widely known that all TPIs are regulated and therefore must be acting in the best interest of the end user – with a clear and transparent fee structure and without deploying aggressive and misleading sales tactics – the industry’s reputation would improve and allow end users to benefit from more competitive pricing. Regulation would also provide an effective channel for complaint if clients feel they have been misled. There is currently a large gap in the market for non-micro customers as to how they can actually complain. If there is a genuine complaint, unless lawyers are involved, there is currently nothing to hold a TPI, or even an energy supplier, to account. Interestingly, it would seem that all stakeholders – from Ofgem, end users and energy suppliers, to the reputable TPIs – would like some form of industry regulation. The major issue is cost and how to pay for the policing while also remaining impartial if funded by suppliers. It has proven extremely difficult to agree a pricing structure for TPIs that would not price out smaller players, since TPIs can range from an individual working on a part-time basis, to extremely large international consultancies. All of which may, or may not, be doing a good job for their clients. There are solutions that can go a long way to helping the situation. Some energy suppliers do audit their TPIs and there are voluntary codes of conduct that can be adhered to via bodies such as the Utilities Intermediaries Association (“UIA”). It is vital that all TPIs should be signed up to such codes and that energy suppliers utilise creditable auditing systems. Punishment for breaking any code should be well-publicised and ensure that it is extremely hard, if not impossible, for such “rogues” to continue operating. The burden of cost would then be the responsibility of both TPIs and energy suppliers. Avoiding the rogue TPIs Until common regulation is achieved, here are five steps to avoiding rogue TPIs: ● Ensure that the TPI is providing a genuine market-wide tender confirming which energy suppliers are included/excluded and why; ● Ensure that each supplier is being compared on the same basis (eg, results should be based around your accurate annual kWh consumption); ● Confirm how the TPI is being paid and how much. Ignore any TPI that says it is a free service; ● Enquire if they are signed up to a reputable code of practice (eg, the UIA); and ● Do not feel pressured to enter into a contract, particularly if it is verbal. ZTP is calling for a mandatory code of conduct to eradicate “rogue TPIs” from the energy industry. To restore trust, remove the hassle of energy management and gain the most competitive pricing for end users, all TPIs must be regulated. Alex Hill is managing director and Joe Warren is a director at ZTP, a strategic energy management consultancy