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UTILITY Week 3rd July 2015

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The Topic: TPIs THIRD PARTY INTERMEDIARIES THE TOPIC 6 | 3RD - 9TH JULY 2015 | UTILITY WEEK I t seems new iron has been plunged into the furnace – or should that be pyre? – of energy sector change: third party inter- mediaries (TPIs). Over recent years, these middlemen – brokers, energy consultants, efficiency advisers, switching sites and aggregators, etc – have become an increasingly active and influential layer in both the domestic and non-domestic mar- kets, thriving and proliferating as trust in suppliers declines. Mediating between suppliers and their customers, TPIs provide impartial guidance and ensure users get the best deal avail- able for their needs (at least theoretically), whether they are domestic, small business, commercial or industrial users. TPIs have also matured in the non- domestic market to offer "niche" guidance to businesses confused about how to negoti- ate a multitude of confusing energy regula- tions and schemes. Customers – especially smaller, resource-stretched businesses that have seen energy take up an increasingly large proportion of their cost base – are anxious to take advantage of any possible exemptions, benefits or deals on offer from government and suppliers while also ensur- ing compliance. TPIs are doing a roaring trade by offering them a helping hand. Furthermore, standing at a distance from the embattled community of energy suppli- ers and network operators, TPIs in both the domestic and non-domestic markets have largely avoided the torrent of toxic political and media abuse poured on the sector over the past 18 months or so. Surveys show that, Customers trust TPIs over suppliers, but for how long? while suppliers in particular are struggling to dredge up even moderate levels of cus- tomer trust, TPIs are enjoying satisfaction and reliability ratings that are high by any standards. A 2013 RS Consulting report recorded 94 per cent of domestic customers rating price comparison site as reliable and a BMG Research report compiled for Ofgem last month found that 74 per cent of micro and small businesses are satisfied with the ser- vice they receive from brokers. However, more recently it has become obvious that the moral high ground TPIs are perceived by many to occupy is distinctly vulnerable. Questions have been raised over the transparency of TPI fees and their oper- ating methods. Commission rates and cold calling practices have sparked criti- cism from consumer and business groups, from Citizens Advice to the Federation of Small Businesses, putting Ofgem under pres- sure to intervene and prompting the Compe- tition and Markets Authority to include TPIs in the first wave of its inquiry in the energy market. As the water sector prepares for mar- ket opening and speculation rises about the opportunity for TPIs to function in that space too, the repercussions of new licensing regimes and codes of practice could be far reaching. The following pages bring updates on steps to improve the regulation of TPIs and insight into other trends which may alter their form and function in the market. JG TPIs are now also the main route to market for new customers in the household market Breakdown of annual TPI revenue Household 23% SME 21% Industrial and commercial 56% Supplier inbound 37% Supplier outbound 18% Collective switching 3% Source: Cornwall Energy Price comparison websites (online and telephone) 42%

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