Notice

Implementing the Statutory Instrument 2024 amending The Redress Order 2008: expanding access to redress to small business consumers for energy disputes

Published 31 October 2024

Introduction

This guide provides a practical framework for stakeholders to implement new amendments to The Gas and Electricity Regulated Providers (Redress Scheme) Order 2008, (the Redress Order 2008), introduced on 12 September 2024 and taking effect on 19 December 2024. The changes primarily affect non-domestic energy suppliers and Small Business consumers, introducing new rights and obligations that both parties need to understand and act upon.

For suppliers, these amendments will require adjustments to ensure they are familiar with the new eligibility criteria for Small Business consumers and be prepared to signpost them to the Energy Ombudsman (EO) for disputes that cannot be resolved adequately between the 2 parties involved.

For Small Business consumers, this amendment introduces a significant improvement in their ability to resolve disputes with their energy suppliers. This is already available to domestic consumers and micro businesses, referred to as ‘relevant consumer’ in the Redress Order 2008, using the following criteria:

a person supplied or requiring to be supplied with gas or electricity at premises other than domestic premises, with:

(i) an annual consumption of:

(aa) electricity of not more than 55,000 kWh; or
(bb) gas of not more than 200,000 kWh; or,

(aa) fewer than 10 employees (or their full time equivalent); and
(bb) an annual turnover or annual balance sheet total not exceeding Euros 2 million.

With the new amendment in the Redress Order (Amendment) 2024, Small Business consumers - defined as businesses that are not ‘relevant consumers’ under the Redress Order 2008 - can also access this service. A ‘Small Business consumer’ is defined as:

a consumer who is not a relevant consumer and who is a person supplied or requiring to be supplied with gas or electricity at a premises other than domestic premises -

(a) with an annual consumption of electricity of not more than 200,000 kWh, or gas of not more than 500,000 kWh, or
(b) with fewer than 50 employees (or their full time equivalent), and an annual turnover not exceeding £6.5 million or a balance sheet total not exceeding £5 million.

This Statutory Instrument aims to ensure Small Business consumers, who often face challenges similar to domestic consumers and micro businesses in managing energy disputes, now have another path to redress apart from lodging their complaints with a Court of law. The guidance provided here will help Small Business consumers understand how to take advantage of these new protections, ensuring their energy supplier disputes are handled swiftly and fairly by the EO.

This document aims to assist both suppliers and Small Business consumers by outlining the key changes brought about by the amendment, and the necessary adjustments they will need to make in response. It addresses:

• Implications for Ofgem Complaints Handling Standards and Supplier Licence Conditions
• Clarifications for non-domestic suppliers
• Clarifications for Small Business consumers

Implications for Ofgem complaints handling standards and supplier licence conditions

The Statutory Instrument – and the expansion of EO redress for Small Business consumers – will take effect on 19 December 2024 to give the EO and stakeholders time to prepare for the changes.

The changes will also have implications for Ofgem licences. The Statutory Instrument introduces a ‘Small Business consumer’ definition as part of the description of consumers who are covered by a Section 47 Order, which automatically updates the Complaints Handling Standards, as its scope is defined by the Section 47 Order. This means suppliers must put in place suitable complaints processes for Small Businesses consumers.

The introduction of the Small Business consumer scope will also trigger 2 expanded licence requirements for suppliers:

1. to only work with third-party intermediaries (TPIs) that are members of a redress scheme when securing Small Business contracts; and

2. to introduce a new supply licence rule for non-domestic suppliers requiring them to signpost Small Business consumers to Citizens Advice and Citizens Advice Scotland.

Providing a buffer period between the introduction of these amendments and them coming into effect allows the regulator to give reasonable notice to its licenced entities (that is, energy suppliers) to prepare for the new rules. Similarly, the EO will need to prepare, including recruiting and training additional staff, to handle an increased number of cases. Giving time to implement will also mean the EO is well prepared to recognise and consider the qualitative differences in cases brought by microbusinesses compared to those presented by Small Business consumers, who are newly included under the EO’s remit.

Roles and responsibilities

As well as having a clear understanding of the EO remit expansion, it is important to understand organisations’ roles and responsibilities to ensure successful implementation.

Organisation	Role and Responsibilities
Department for Energy Security and Net Zero (DESNZ)	- Raises awareness by providing informational resources to ensure all stakeholders understand the changes and their implications. This Guidance note is part of these efforts. - Sets the law by and monitors overall compliance to ensure adherence to statutory requirements. - Assesses compliance and monitors implementation. DESNZ works closely with Ofgem to assess the performance levels of the EO and gather stakeholders’ feedback about the new amendments and their implementation. DESNZ is committed to a review period 12-18 months after any changes come into effect. This review will cover the thresholds set and assess whether they are fit for purpose, as well as consider any necessary expansions of access.
Office of Gas and Electricity Markets (Ofgem)	- Ensures supplier licence conditions are harmonised with the new statutory instrument and that suppliers comply with these requirements - Responsible for assessing whether the EO still meets the approval criteria under which it was appointed, every 2 years.
Energy Ombudsman (EO)	- Handles disputes and complaints from Micro Businesses and, from 19 December, Small Business consumers, in a fair, timely, and effective manner.
Non-domestic energy suppliers	- Implement the necessary changes to systems and processes to identify and manage small business consumers - Communicate eligibility and redress information clearly to customers
Non-domestic consumers (small business consumers)	- Engage with suppliers and regulatory bodies to understand their rights and responsibilities under the new scheme - Utilise the redress mechanisms available to resolve any issues if needed, after first engaging with the supplier
Citizens Advice and Citizen Advice Scotland	- Provide independent advice and support to Small Business consumers regarding their rights under the new amendment - Assist in the dissemination of information and guidance to ensure widespread understanding of the redress scheme

Clarifications for non-domestic suppliers

The main areas identified by non-domestic suppliers during the consultation and on occasion of other engagements with DESNZ, Ofgem and the EO as needing further clarification relate to how to identify Small Business consumers qualifying for redress through the EO, their duties in sharing eligibility information with the consumers, and payment of fees to the EO for cases brought against them.

Identifying small business consumers, and distinguishing them from micro and larger businesses

1. What are the criteria based on the consumption threshold, particularly the consumption period used to calculate the consumption threshold?

The new definition of Small Business consumer builds on a combination of 3 thresholds – the number of employees, financial limits and energy consumption thresholds:

(1) 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 at most £5.0 million OR
(2) an annual electricity consumption of not more than 200,000 kWh OR
(3) an annual gas consumption of not more than 500,000 kWh

We acknowledge that some businesses might exceed the average consumption thresholds, but businesses may qualify under the other thresholds for employee numbers and the financial indicators. These thresholds ensure that businesses most in need of redress can access it. The consumption threshold calculation will be based on an appropriate 12-month period, such as the 12 months prior to the date of receiving a quote for a contract or, where a business has not been operating for 12 months, an appropriate estimation of their consumption.

Regarding the turnover threshold, we converted the turnover amount from Euros to British Pound Sterling and raising this to £6.5 million for turnover and £5.0 million for balance sheet total. This is in line with the thresholds used by the Financial Conduct Authority (FCA) for small business access to the Financial Ombudsman Services. This change also reflects that the United Kingdom has left the European Union. The amendment to the Order also applies to the turnover threshold in the Micro Business consumer (‘relevant consumer’) definition, where the reference to “Euros 2 million” will be substituted with “£2 million”.

2. Who is responsible for determining if a business meets the criteria to be considered a “Small Business consumer”?

As suppliers have rules requiring them to take certain actions with Small Business customers, suppliers need to take all reasonable steps to identify whether the Non-Domestic customer is a Small Business customer, or deem that customer to be a Small Business Customer.

3. Which principles should be followed when applying thresholds to businesses operating in the context of framework agreements, and other aggregated contractual arrangements?

There are many different ways contracts can be structured, so we cannot provide an exhaustive list for all scenarios. Suppliers should follow similar processes to the way they have applied the pre-existing requirements of Micro Business customers. If a small business consumer operates under framework agreements and other aggregated contractual arrangements, and:

• The energy contract is agreed upon centrally by the parent company, and all businesses under the framework agreement, including the parent company, collectively meet the eligibility criteria of a small business consumer, the business is considered a small business consumer and can access the EO.
• The energy contract is agreed upon centrally by the parent company, and all businesses under the framework agreement, including the parent company, collectively do not meet the eligibility criteria of a small business consumer, the business is not considered a small business and cannot access the EO.
• The business within the framework agreements or other aggregated contractual arrangements agrees to its energy contracts directly and meets the small business consumer threshold, then it will be considered a small business consumer and be able to use the redress services through the EO.

4. How should suppliers treat customers that grow or reduce in size?

Businesses may grow or shrink in size, whether in terms of the number of employees or financial indicators, over time. Unlike redress sought through the courts, one advantage of using alternative dispute resolution, such as through the EO, is the expedited resolution of disputes with energy suppliers. The average time for concluding a case presented to the EO is 6 weeks. This reduces the likelihood that the business will change in size between resorting to the EO and having the case concluded.

For the purpose of seeking redress through the EO, what matters is the size of the non-domestic consumer at the time of stipulating the contract with the energy supplier. Therefore, the size of the business when the issue is resolved or when the issue takes place does not affect the complaint process.

5. How does the Energy Ombudsman handle complaints where the consumer meets the Small Business consumer definition but is also classified as a Micro Business by the supplier under the Supply Licence?

Once the consumer is identified to be a Small Business consumer, the supplier will have the ability via the case management system to flag to use that they are treating the consumer as a Micro Business, so that this can be taken into consideration when investigating the complaint. For reporting, the Energy Ombudsman would report these consumers as Small Business consumers, but having the additional data from the supplier about how they are treating the consumer will allow the Energy Ombudsman to cut the data in more ways should there be a need to gain any insight about the differences between Small Business consumers who are treated as Micro Businesses and those that aren’t.

Sharing eligibility information

6. What are the communication protocols suppliers should use to inform customers about their eligibility for the redress scheme, including frequency and method of communication?

The communication protocols a supplier must use to inform their customers about their eligibility of any redress scheme is set out in the supply licence condition (SLC) 20.5. This states that the supplier must provide to each of its Non-Domestic Customers information concerning their rights as regards the means of dispute settlement available to them in the event of a dispute with the licensee, by providing that information on any relevant Promotional Materials sent to the Non-Domestic Customer and on or with each Bill or statement of account sent to each Non Domestic Customer in relation to Charges or annually if the licensee has not sent such a Bill or statement of account to them. Such information must include, but is not limited to, how the procedures under any Qualifying Dispute Settlement Scheme can be initiated. To note, Ofgem’s rules also require suppliers contracting with Small Business or Micro Business customers via a Third Party, such as an energy broker, to only work with Third Party’s that are are a member of an appropriate redress scheme, so that customers who have issues with their Third party can access a redress scheme for Third Party issues if needed.

Fees and payment guidelines

7. What are the specified amounts and methods for making payments to the EO for cases brought against suppliers?

Suppliers are charged by the EO a fee for each case they undertake, independent of the outcome. Fees are reviewed each year.

Clarifications for small business consumers

The main areas identified by non-domestic consumers as needing further clarification relates to understanding eligibility, the process and steps to access redress, and how to access to the support and resources available to them.

Accessing redress

8. What are the detailed steps to lodge a complaint with the EO?

The consumer must first contact their energy supplier or broker directly to address any issue, allowing the supplier 8 weeks to resolve the matter. If there is no resolution after 8 weeks, or if the consumer receives a Deadlock Letter, they can escalate the dispute to the EO if they are a domestic consumer or if they are a non-domestic consumer and meet the relevant criteria.

The fastest way for the consumer to lodge a complaint is online at Energy Ombudsman: Ready to register your dispute? The consumer should search for their energy supplier using the search bar and confirm that they have allowed the supplier 8 weeks to resolve the dispute or have received a Deadlock Letter. They will then be redirected to the Dispute Resolution Platform, where they can provide their details, information, and supporting documents. Communication with the EO will continue via the Dispute Resolution Platform until a decision is reached.

Alternatively, the consumer can lodge a complaint by telephone, email or post:

• by phone - 0330 440 1624, phone lines open Monday to Friday from 8 am to 8 pm, Saturday from 9 am to 1 pm (closed on Sundays and Bank Holidays)
• by email - enquiry@energyombudsman.org
• by post to:

The Energy Ombudsman
P.O. Box 966
Warrington
WA4 9DF

The time of processing of the complaint and get to a decision varies according to the complexity of the case, but the Energy Ombudsman looks to resolve all cases within 6 weeks of the, receiving evidence from both parties however, less complex cases may be resolved more quickly.

The EO can instruct suppliers / brokers to issue an apology, make recommendations to prevent future issues, take practical actions such as cancelling or changing the customer tariff, make a financial award (currently, up to £10, 000), or implement a combination of these actions.

Additionally, all businesses retain the right to seek redress against energy suppliers through the courts.

Support and Resources

9. What resources and support are available to non-domestic consumers to help them navigate the new system and access the EO?

Citizens Advice provides a range of resources to assist Micro Business and Small Business consumers in understanding and navigating the energy system. Informational websites dedicated to handling complaints about energy companies can be found at the following links:

• Dealing with your small business energy bills
• Switching your small business to a new energy supplier
• Dealing with your energy supply when you move business premises

Business consumers can also seek guidance from the Citizens Advice Consumer Helpline. The helpline offers advice on how to make a complaint to the Energy Ombudsman and provides support for consumers who may disagree with the Ombudsman’s decision.

For direct assistance, microbusiness consumers can reach out to Citizens Advice through multiple channels. The Citizens Advice Consumer Helpline is available at 0808 223 1133 from Monday to Friday, 9 am to 5 pm, with closures on bank holidays.

Online support options are also available. Microbusiness consumers can access chat support Monday to Friday, 9 am to 5 pm (excluding public holidays) by clicking the ‘Talk to an adviser’ button on the Citizens Advice website. If the chat feature is unavailable, consumers can use the online Citizen’s Advice form to contact them regarding energy-related issues.

10. Can I also seek redress for an issue with my energy broker or other third-party intermediary (TPI) service?

Ofgem’s rules also require suppliers contracting with Micro Business customers via a Third Party, such as an energy broker, to only work with Third Party’s that are a member of an appropriate redress scheme, so that customers who have issues with their Third party can access a redress scheme for Third Party issues if needed. This redress scheme is called a Qualifying Dispute Resolution Scheme (QDSS).

From December 2024, in line with the government’s proposed new Small Business consumer definition entering legislation within the expansion of the Energy Ombudsman’s remit provision, Ofgem will introduce a requirement to ensure that the TPIs suppliers work with to establish contracts with small consumers are also registered with a QDSS.

If you have any questions, please contact:

• DESNZ at redressconsultation@energysecurity.gov.uk or
• Energy Ombudsman Services at mailenquiry@energyombudsman.org