Ofwat has called for more regulatory powers over third party intermediaries (TPIs) to prevent the worst business practices and mis-selling becoming a part of the non-domestic water market when it deregulates later this year.
The independent water market regulator said that more formal powers of regulation would be important if the organisation was to ensure that business customers are treated fairly.
Along with other industry experts, Ofwat expressed a desire to prevent the worst aspects of gas and electricity markets spreading to water as market barriers are lowered.
The call for more powers came as Ofwat launched a consultation on the principles for voluntary codes of practice for TPIs.
In the consultation document, Ofwat recognised that TPIs have a value for customers in the water market and in other sectors like energy.
“The involvement of TPIs in the business retail market could provide many direct benefits to customers and support market development by facilitating higher levels of customer engagement and potentially encouraging a multi-utility market,” the document said.
But it also recognised that some tactics used by brokers and other TPIs can damage non-domestic customers. “There is a risk that the activities of some TPIs may cause customer harm, especially for smaller business customers,” they said.
To stop the worst practices, Ofwat pointed out that similar industries had been awarded different powers to help regulate TPI activities.
The energy regulator Ofgem was given additional powers to protect businesses from misleading marketing, enforcing government regulation.
The Competition and Markets Authority, meanwhile, has been given powers to investigate price comparison websites to make sure they are being run to the benefit of customers.
Ofwat senior director Richard Khaldi said: “The use of TPIs is a key opportunity for customers to engage through a forum they already use for other services and to potentially benefit from multi-utility offerings.
“While many TPIs offer valuable services to business customers and will play an important part in the new water market, there have been concerns about the way some TPIs have operated in other markets, such as energy.”
One method of preventing malpractice by brokers in the energy market is through self-regulatory methods like codes of practice.
In the past, Ofgem has called for non-domestic TPIs to be regulated through a mandatory code of conduct, overseen by the regulator, but these plans have been shelved.
Utility Helpline is a member of the TPI Code of Practice for energy brokers which is a non-mandatory scheme to prevent business tactics.
Broker mis-selling tactics ‘worst ever’
Ofwat wants more powers to regulate TPIs because it wants to keep some of the worst business tactics and mis-selling out of a deregulated water market.
Business tactics from some brokers in the energy market are at their “worst ever,” according to Utility Helpline’s Energy Manager, Richard Bonelle.
He said “We are seeing some of the worst ever business tactics from some energy brokers at the moment. Even at our office we are getting phone calls from brokers, pretending to be suppliers to get a foot in the door and try and sell. And since some companies are clearly getting away with mis-selling, other brokers think ‘why not’ and start doing the same.
“We would welcome whatever regulation is necessary to stop these tactics spreading to the water market.
“But in the short term at least, I don’t think it will be a huge problem. At the moment, the profits are too small to tempt the worst brokers to compete. We are offering water as a value-added service, making it simple for our customers to save in the future when the market gets more efficient.”