Why Third Party Intermediaries are more important than ever
The cost of doing business is taking its toll. Small business confidence has hit the lowest point ever recorded outside of the pandemic, according to the Federation of Small Businesses (FSB). And no wonder — planned increases to tax and business rates, sluggish consumer demand and continually high energy prices are generating immense pressure for business owners.
With such pressures on small businesses, being able to quickly and easily access good-value energy deals is essential. It’s also important that businesses can accurately monitor energy usage, or raise a complaint when things go wrong.
Unfortunately, new research from Citizens Advice and Yonder shows that these basics are far from guaranteed. It has also shown that customer experiences can vary widely, with stark contrasts arising depending on whether a business goes direct to their supplier or whether they use a Third Party Intermediary — or TPI.
A TPI is a company that helps a customer find and agree an energy contract or tariff. They can also help energy customers access other products and services, such as solar panel deals.
In our research, we mostly interviewed business energy customers who either dealt directly with their energy supplier, or who used a type of TPI called a broker. Energy brokers specifically help businesses by negotiating an energy contract on their behalf, often arranging and signing contracts with suppliers.
Although brokers work closely with suppliers, like all TPIs, they are currently not regulated. This can cause big problems for customers, and we’ve previously called on the Government to introduce more consumer protections in this space.
Now, our research has shown that a new regulatory framework might be more important than ever…
Stuck in the middle?
The use of energy brokers has become more common. Our research found that experiences of poor customer service, the energy price crisis, and complex billing issues have weakened consumer trust in the market. As a result, nearly half of small businesses now turn to a TPI to secure their contract — rather than dealing directly with their supplier.
We also explored the differences in experience between those who use a TPI, and those who don’t. We found that businesses who used a TPI tended to be much more satisfied with their service than those who went directly to their supplier. For example:
- Satisfaction levels with the sales process overall were much higher among TPI users, at 93% compared to 76% for those who went directly to their supplier
- 74% of TPI users found it easy to compare rates between different suppliers, compared to just 67% of those who didn’t use a TPI
- TPI users were also more likely to be engaged with their energy overall: 50% of TPI users stated that they were “highly committed” to achieving net zero carbon emissions, compared to just 25% of other businesses
These statistics have significant implications for energy suppliers and the wider market. Despite the essential role that brokers play in the energy market, they are not yet regulated. This means that when things go wrong for a small business, getting a resolution or raising a complaint can be extremely difficult. For example, whilst 87% of the TPI users felt that they understood the terms offered, only 82% felt that their broker was being transparent about their fees, and 80% were satisfied with how their broker handled complaints and issues.
These figures might seem high. However, 20% of businesses are unhappy with how their problem was resolved. Due to the lack of regulation in the sector, other options for recourse are limited. A costly court battle is often the only choice remaining.
This matches the issues we see when small business customers come to Citizens Advice for support. As TPIs aren’t regulated, it’s much harder for us to monitor problems that come directly from TPI customers. However, anecdotal evidence from existing case notes reveals that where customers do experience issues with TPIs, these are often severe, and extremely disruptive to a customers’ life or business.
Next steps
Our research makes it clear that fundamental aspects of the energy retail market are not working for non-domestic consumers. This diminishes consumer confidence, inhibits business growth, and ultimately endangers the transition to Net Zero. Third Party Intermediaries — including brokers and Price Comparison Websites — can be key players in getting consumers the support they need during the energy transition.
Small Businesses deserve access to products and services that help them control their energy usage and lower bills. Ofgem and DESNZ must raise standards for business consumers, and help improve access to the market. Looking at the result of our research — this work must include getting TPI regulation up and running without delay.
Read our full report on our website: https://www.citizensadvice.org.uk/policy/publications/small-and-micro-businesses-experiences-of-the-energy-retail-market/
