Last week the UK government announced that following a consultation on regulating TPIs in the Retail Energy Market it would hand responsibility for this regulation to Ofgem. The consultation which ran between September and November 2024 assessed plans to enhance consumer protection and support consumers transitions to a cleaner energy system.
Why is regulation being introduced?
Within the consultation response, the government made clear that it considered there to be many shortcomings within the current set-up of the TPI market with some failing to meet the needs of consumers through engaging in non-transparent and mis-selling practices. The government also noted that TPIs can play a significant role in helping non-domestic consumers take-up clean energy sources and efficiency measures, with regulation helping to further solidify a TPI’s role within this transition.
What does the government intend to introduce?
The government will proceed with its option of a ‘general authorisation regime’ where a regulator (Ofgem) will be responsible for enforcing compliance with the regulatory principles. The initial regulatory principles will cover the scope of ‘energy procurement’ services only. Ofgem’s powers will include the ability to set rules & principles, monitor & investigate TPIs, order redress and require TPI authorisation before operating in the market through a license scheme.
The costs of regulation should be placed upon the TPIs being regulated according to the consultation response as it is a preferable approach than recovering costs via the existing Ofgem cost recovery mechanisms. This approach would also ensure that TPIs would directly pay for the costs of regulating their market and have the financial incentive to reduce the costs of regulation.
Next steps
Ofgem will undertake a market survey which will inform the creation of a model for the structuring of the TPI market and once legislated by the government in parliament, Ofgem will then introduce a set of principles for TPI behaviour, developing specific rules and introducing the registration process for a license to operate.
LGE’s view
As a TPI in a crowded marketplace, LGE has always looked to differentiate ourselves from our competitors in several ways, including being advocates for transparency in the sector. A decade ago, LGE became an early adopter of Ofgem’s proposals for transparency and LGE also provides all clients with full transparency on utility cost make-up, which may seem an obvious requirement but can be a rarity in the TPI industry. LGE therefore strongly welcomes the findings of the consultation and hopes to see other TPIs embrace transparency in a similar manner.
Introduction of regulation will protect end users and strengthen confidence in the sector as a whole. LGE looks forward to actively engaging with policymakers and industry partners to shape and support the development of this scheme, ensuring it delivers meaningful and positive changes for non-domestic consumers using the TPI sector.
LGE’s Managing Director Asif Rizvi stated that: “As an organisation that has always acted transparently and in the best interests of our clients, LGE fully support the proposed introduction of a regulatory license for TPIs. Such regulation represents an important step forward in raising standards across the industry, ensuring that integrity, professionalism, and accountability are at the heart of the sector.
The actions of a minority of brokers have in the past often undermined the trust and good work of reputable TPIs who play a vital role in helping organisations navigate the complexities of the energy market and secure value-driven, sustainable outcomes.”