Blog Post

The key compliance and regulatory issues new energy market entrants need to know

Richard Simmonds • April 14, 2021

New entrants to the energy market face a wealth of rules and regulations they need to adhere to but there are a few that are more important than others. In this piece, we look at the key compliance and regulatory issues a new energy supplier has to know.

Customer Number Thresholds

New energy suppliers should be aware of customer number thresholds as they mean that new smaller suppliers do not have to comply with certain rules until they reach the required number of customers.

Understanding these exemptions can help a new energy supplier make important decisions when it comes to managing their business and allows them to strategise around the size of their customer base.

Some of these exemptions will allow a start-up supplier to have a price offering advantage over their larger and more restricted competitors.

Also read: How to Start an Energy Supply Company

Standard of Conduct

All energy suppliers need to adhere to Ofgem’s Standards of Conduct. These rules set the foundation for the electricity and gas licences and are rules that apply on how a supplier interacts with customers.

All customers must be treated fairly, and this goes beyond the ‘all reasonable steps’ measures. Instead, energy suppliers need to continuously prove that they are doing all they can to improve their customers’ experience and integrate a customer-friendly culture within the business.

When it comes to domestic customers the energy supplier has to be able to prove and demonstrate how they identify and support their most vulnerable customers as well as show how they respond to their needs.

The standards also cover all the communications between the supplier and its customers such as how complaints are handled, how tariffs are offered, and the overall quality of the service provided.

Every energy supplier also has to adhere to standards of behaviour, information, and processes and these also apply to any organisations and third party’s that work with and/or represent the supplier.

Also read: Add your Customers to the Priority Service Register with Dyball’s CRM

Complaints Handling

All energy suppliers are held to strict standards when it comes to handling customer complaints. Under the rules Ofgem expects all suppliers to deal proactively with complaints from their domestic customers.

To this end, a new energy supplier should set up complaints procedures that detail how they will handle customer issues.

It’s also a good idea to train all staff in these procedures, especially the management. This is because customer issues can result in negative media coverage that in turn will harm a company’s reputation and that of the wider energy supply sector.

Also read: How to Improve Consumer Trust in Energy Suppliers?

Supply Licence Condition 25 Mis-selling

Supply Licence Condition (SLC) 25 provides that suppliers must not mislead or otherwise use inappropriate tactics to sell to customers.

New market entrants may be tempted to try and snap up and attract new customers rapidly by offering tariffs that are perhaps too good to be true.

This means that a new supplier must provide accurate information to domestic consumers, not mislead them when it comes to costs and ensure that all dealings with customers are done fairly.

Since the introduction of this condition total fines issued against energy suppliers for mis selling have numbered into the hundreds of millions of pounds.

Also read: 2020 could be a record year for fines imposed on energy suppliers

Back Billing

Energy suppliers need to ensure that they provide accurate energy bills to their customers.

As a result of meter reading errors, accidental cancelling of direct debits or incorrect data entry an energy supplier may realise that they have undercharged a customer. In the scenario where the supplier is at fault, they cannot send an energy bill that includes unbilled energy that was consumed 12 months before the issuance of the bill.

Back billing is a major issue for the industry and has been the cause for many negative headlines in the press and rightly so. With technologies such as CRM and energy billing systems, such errors should not occur.

All new energy suppliers should also sign up to the voluntary Code of Practice for Accurate Bills that seeks to ensure that suppliers take responsibility to ensure consumers are accurately billed.

Also read: Back Billing Code of Practice

Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates Ltd can help.