Ofgem urged to act on rates as consultation into broker fees ends

Ofgem has been urged to act on “out of contract” rates by Box Power, the same social enterprise which helped force a consultation on hidden broker fees. 

This comes as the consultation on transparency for energy broker fees has now ended, with Box Power CEO Corin Dalby saying the regulator “must go further” on unduly onerous rates to make prices fairer. 

An investigation by Box Power conducted in July found that 50% of suppliers’ deemed rates were grossly unduly onerous. 

According to the energy provider, these rates are often applied to businesses, charities or organisations who have moved premises and do not have a fixed rate or no contract yet. They may also be at the end of their fixed rate contract.

Box Power says the issue is that the cost in these circumstances is higher than what a fixed rate contract would be, and argues that deemed rates should be sold to the business at cost price without the seller making a profit. 

Currently, most suppliers are only legally bound to ensure their contracts for microbusinesses are not unduly onerous, which Box Power believes should extend to all businesses. 

In a letter to Chancellor Jeremy Hunt earlier this year, Ofgem said: “We have clear rules around rate setting for these types of contracts and will be addressing this with companies where this is found not to be the case.”

However, Box Power is calling for Ofgem to introduce its ‘Wholesale Price Plus’ idea to “truly tackle the problem”.

Dalby said: “Our proposed Wholesale Price Plus mechanism enables a simple formula that brings fairness to all businesses on such rates, but which still enables the suppliers to be fairly compensated for the burden of supplying such metres.

“This would then ensure those caught out by such out of contract/deemed rates whether through business choice or as a new incoming tenant into that business etc are being fairly treated by not paying “unduly onerous” rates.”