Ofgem reforms 'welcomed' by sector

By Rebecca Weller

- Last updated on GMT

Long time coming: hospitality sector reacts to Ofgem's plans to address energy crisis (Credit: Getty/Selitbul)
Long time coming: hospitality sector reacts to Ofgem's plans to address energy crisis (Credit: Getty/Selitbul)

Related tags Legislation Government Finance Energy

Ofgem’s reformation plans to address the ongoing energy crisis have been welcomed by the sector, but trade bodies warn the Government must act “urgently” to avoid more business failures.

The energy regulator stated a series of changes would be introduced across several publications, including a non-domestic market review, a consultation into consumer standards and minimum capital requirements for supplier finances.

UKHospitality (UKH) chief executive Kate Nicholls “welcomed” Ofgem’s market review, stating energy continues to be a “critical concern” for many in sector.

Though Nicholls added the recommendations in the review must be “actioned urgently” to avoid “further business failures” and that energy firms must be “held to account”.

She said: “By opening new channels of communication, extended protections and more guidance, businesses ​across the industry can benefit from levels of support that simply have hitherto been lacking. 

UKH ​has continued to raise the reckless behaviour of some energy suppliers with Government, with some offering rates well above wholesale prices, hiking standing charges, demanding eye-watering deposits, and, in some cases, refusing to work with hospitality companies.”

Additionally, a recent member survey by UKH revealed energy costs were up 80% year-on-year, leaving almost half of businesses who signed a contract at the peak of the energy crisis fearful their business was at risk of failure.

 Slow and inadequate 

“Whilst it has been a long time coming, it is reassuring to see Ofgem is now doing what it can to support the hospitality sector”, Nicholls continued.

The energy regulator stated it had taken the steps to “drive up standards” before the winter months to ensure all consumers receive a “consistent and acceptable” level of service irrespective of who their energy supplier is.

However, Night-Time Industries Association (NTIA​) CEO Michael Kill said the Government response to the energy crisis has been perceived as “slow and inadequate” and that many issues relating to the sector are still “prevalent”.

Kill said: “While these proposed reforms are seen as a step forward, they will not provide immediate relief to the thousands of businesses within the sector who are facing further anxiety each time they receive an energy bill.
“Some of the main concerns for businesses in the hospitality and night-time economy include overzealous security deposits, unsubstantiated rates based on risk and the withdrawal or refusal of energy supply.

“These practices are still prevalent and are causing significant worries for businesses in these sectors.”

Kill added hospitality and night-time economy businesses have been charged up to 15% more by energy suppliers compared with their retail counterparts in some cases, creating a “considerable loss of confidence in the energy sector”.

Unacceptable behaviour 

Ofgem said its review into the non-domestic market would summarise the “challenges” faced and propose a “number of actions” for both the energy regulator and the Government to address.

He continued: “Businesses feel that suppliers have taken advantage of the vulnerability of these sectors.

“While domestic supply appears to have received some level of assistance, the non-domestic supply has been limited, leaving many businesses in these sectors to fend for themselves, and resulting in some cases in business closures.”

Moreover, British Beer & Pub Association (BBPA​) chief executive Emma McClarkin urged the Government to “reassure” business they won’t be left “at the mercy” of energy supplier costs again.

She added: “This long-awaited review from Ofgem which publicly notes the unacceptable behaviour of energy suppliers towards businesses over the past year is welcome.

“A failure to act sooner has cost businesses across the country millions of pounds and undue stress for months on end.

“Poor supplier behaviour has also led to hospitality as unfairly being seen as a risky sector​.”

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