PreAction is receiving questions from our clients regarding a price cap for business energy customers and where this leaves brokers regarding short to midterm sales activity.
We are hearing positive whispers, yet further clarity is still needed as agreements are made between Government and suppliers, filtering through to TPIs.
Below are some common questions and brief answers as we know them;
Why the U-Turn from the Government?
Until a few days before the announcement, Liz Truss and the Government were still saying there would be “no handouts for business”.
On Wednesday last week, suppliers were invited to a 9.30 pm call with BEIS (Department for Business, Energy and Industrial Strategy) to discuss proposals.
Suppliers (mainly a member of the Big 6) expressed concerns about the proposals resulting in the Government issuing a less fact-specific statement regarding businesses last Thursday.
What did the Government say about a price cap?
What do we know so far?
PreAction has received information that BEIS held Zoom calls with all suppliers on Friday
In these calls, BEIS is said to have proposed the idea of a price cap for businesses that reflected that implemented for domestic customers.
This proposal allegedly received pushback from many suppliers.
10 Downing Street announced today:
Businesses will receive money to help them with increases to their fuel bills from October, Downing Street has announced. It made the commitment in response to today’s Financial Times story saying that business figures have been told the energy support scheme for companies may not be in operation until November.
How might a price cap scheme work?
Following the ambiguous statement, we aren’t quite sure yet.
The Government said they “will provide the difference between this new lower price and what the energy retailers would charge their customers were this not in place”.
It’s widely known within our industry that the business market operates differently from the domestic market, therefore the solution will need to suit.
More complexities in meter types, purchasing types & a varying range of suppliers with different portfolio types will mean a solution is needed which is flexible and works for all.
Could a price cap include fixed contracts?
The big question at the moment & the answer is, we don’t know.
We know that it will apply to businesses on variable (OOC/VPP) rates and those whose contracts are due to end shortly (we assume as they go onto variable rates). As well as, those “who have recently entered into contracts”, Jacob Rees Mog confirmed verbally later on Thursday afternoon.
Will energy broker commission be impacted by a price cap?
The short answer is it shouldn’t.
Even if the cap does include all fixed contracts, the suppliers will still be getting paid (with the government/taxpayers ultimately picking up the difference).
It could be likely that suppliers and BEIS will try and maintain competition within the market and allow switching.
Typical supplier agreements state commission is calculated by the uplift a broker levies x AQ x term. The uplift is not changing.
Is there anything I should be doing?
PreAction will join with some key partners in writing to BEIS to highlight the risks brokers face unless the cap covers all contract types and how valuable brokers are to businesses.
In the interim, we feel communication is key.
Offer open dialogue with your customers, supporting your value-added services & agreeing on a strategy regarding striking an agreement at the opportune time.
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When will we know more?
In the absence of a public announcement, we will continue to keep you up to date with what we know when we know it.
Some of our sources have indicated we could receive further updates towards the end of the week/early next week.
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