Small businesses and households use a range of methods to find better energy deals and manage their energy use including brokers, switching services and price comparison websites. These services, collectively known as Third Party Intermediaries (TPIs), can play an important role in helping people navigate the retail energy market and secure more affordable, sustainable options. However, building consumer awareness, trust and protections around TPIs services is vital.
Small business experience of energy brokers
The UK Government estimates that there are over 2,000 brokers and consultants operating on the non-domestic side of the energy retail market alone. They have a vital role to play in enabling the 350,000 small businesses in Scotland to secure a good deal on their energy bills, keeping their costs to a minimum and supporting their profitability and contribution to wider economic growth.
Yet Scottish small businesses’ experiences of brokers are not as positive as they could be. Consumer Scotland’s new small business survey highlights the relatively higher dissatisfaction levels with brokers in the energy market (15% of those using brokers expressed dissatisfaction with services) compared to water (8%), telecoms (6%), financial services (1%) and other markets (1%). It would be wrong to say that the picture is all bad – 76% of those businesses in Scotland that engaged an energy broker were satisfied with the service they received. This compares to the 83% of small businesses using brokers in the financial services market who expressed satisfaction with the services provided to them.
Our report on small businesses recommends that third-party regulation in the energy and water sectors should be strengthened. In the energy sector some measures have already been put in place to help small and micro-businesses. In 2024, Ofgem introduced new rules requiring energy suppliers to only work with TPIs that are members of a formal scheme to resolve disputes when arranging contracts for small businesses and making TPI service fees clear in all non-domestic contracts. This was in addition to the UK Government’s expansion of access to the Energy Ombudsman dispute resolution services for small businesses.
At the end of last year the Uk Government set out its intention to go further with proposals for new TPI regulation in the energy market. In these proposals it recognises business consumers do not enjoy the same benefits and protections as domestic consumers. For example, there is no price cap for non-domestic customers, and no ‘cooling off’ period after a contract is signed. Yet the findings of our small business survey highlight the challenges small businesses continue to face around securing fair and affordable energy contracts. When performing well, brokers can help businesses get better deals, but regulation is vital to ensure they do this.
Regulation that can empower and protect all consumers
Responding to the UK Government’s consultation on TPI regulation, Consumer Scotland also highlighted the challenges households face around TPI use. For example, those using auto-switching services - where a company automatically shifts a customer on to a different deal - can miss out on the cheapest prices for gas and electricity. Consumers are not always aware that the range of deals open to them via these services can be limited and linked to commission. Similarly, bill-splitting services where a company manages multiple utility bills for student households can also mean they miss out on the cheapest deals due to arrangements companies have with some suppliers but not others. Our feedback to the Government also drew attention to vulnerable customers potentially missing out on critical services and support due to not having a direct relationship with their supplier.
The current lack of regulation makes it very difficult for any consumer - household or business - to seek help, compensation and resolution when things go wrong. So, the UK Government’s commitment to act, with a focus on putting in place tighter regulations for those TPIs that have high-levels of control over consumer decisions such as auto-switchers and bill splitting is welcome. Previously the government had suggested a less strict approach, but we highlighted that it was important to ensure greater protection for those consumers using these higher risks products and services that pass more control to TPIs. We are pleased that the UK Government has signalled its intention to adopt a more proportionate and risk-based approach to regulation.
However, there is still some way to go. Momentum now must be sustained around designing a framework that works for all consumers, recognises the valuable role that TPIs can play in the domestic and non-domestic markets and is underpinned by sufficiently stringent enforcement measures. Consumer Scotland is committed to working with government, advice and consumer bodies, the regulator, the ombudsman, suppliers, TPIs and others to achieve this. Done right, it could help consumers bring down the cost of their energy bills and make more sustainable choices, as well as allowing small- and micro-businesses to flourish, extending their vital contribution to the Scottish economy.