The Independent TPI Code of Practice Annual Report and External Audit findings: October 2013
The Third Party Intermediaries (TPIs) Code of Practice was established and commenced operation in August 2012 to improve sales processes for small business energy customers and introduce minimum standards and a disciplinary framework for TPIs who operate via the Code. More than 200 energy brokers have now signed up to the Code, along with E.ON, one of the UK’s leading energy suppliers. In addition many hundred sub agents are covered by the Code provisions as they operate through other TPIs rather than contracting directly with E.ON.
The Code is internally audited by E.ON and monitored by an Independent TPI Code Manager assisted by an external Code Panel made up of independent non-executives with appropriate industry and regulatory experience.
Year 1 Operations
At commencement the Code covered some 170 TPIs. This number has now risen to over 200. The vast majority of TPIs have shown they operate to high standards and are open, honest and transparent when dealing with the customer.
During the first year most audits have shown minor breaches although some TPIs have shown no breaches at all. Following audits and also customer complaints all breaches have been examined vigorously with strict timelines for rectifying problems and sanctions imposed where appropriate. This has resulted in one TPI being expelled from the Code.
Audits have been particularly useful in identifying trends and common issues in Code compliance as well as the identification of those agents who could be classified as high risk. In addition it has been possible to track the relationship between Code compliance and customer complaints.
Concerns exist particularly about some aggregators who employ sub-agents although it has been reassuring to see the commitment of the vast majority of these TPIs to fix the issues going forward.
In total 9 major breaches have resulted in formal sanctions being imposed upon the TPI.
External Independent Assessment
At the end of the first year of operation an external assessment of the Independent TPI Code of Practice has been carried out by KPMG who have considerable experience as auditors both of the industry and of assessing other industry Codes of Practice. They have examined what has been achieved to date and how processes could be improved in the future. Their main findings are
- E.ON management have successfully established an audit programme against a challenging backdrop of a very large number of TPIs
- Breaches of the Code are being identified, recorded, reported and acted upon appropriately as part of the audit process
- E.ON management and the Independent Code Manager are dealing effectively with major breaches identified
- E.ON and the Independent Code Manager have conducted a number of escalations regarding non-compliance and agents have been suspended and terminated from selling on behalf of E.ON as a result
- The nature of the compliance auditing of the Code inevitably mean this is a learning process and assistance will be provided going forward in developing better practice and an improved compliance regime
- Further work needs to be done to ensure that audit processes and the level of testing is sufficiently detailed to properly measure compliance with all aspects of the Code
As the energy industry comes under ever increasing scrutiny the external assessment has shown there remains further work to be done to improve standards across the industry. This highlights the need for an industry-wide independent Code of Practice containing a mandatory set of standards to which all suppliers and TPIs should comply. Only then will we see a better quality experience for all business energy customers.
It is believed that some 50% of all sales are made via the TPI channel in the non-domestic energy sector and therefore it is vital that customers are satisfied with the information they receive and the manner in which they are provided with the service. It is only with a single industry wide mandated Code that is vigorously managed and enforced will this be achieved.
The Way Forward
At present the only supplier signed up to the Code is E.ON and they are to be congratulated on being prepared to invest time, money and resource to ensure higher selling standards for their business customers through TPIs. Both staff of E.ON and the vast majority of TPIs show commitment to ensuring compliance with the provisions of the Code and to the implementation and development of an effective audit process.
As a Code we shall continue to work closely with the industry regulator, Ofgem, and other industry players and will pay particular attention to any changes that are introduced via the Retail Market Review to ensure that TPIs continue to treat their customers fairly in the areas of behaviour, information and processes.
It is strongly recommended that other suppliers should adopt the TPI Code without delay. The deliberations of Ofgem in this area should see a single industry wide Code for all business customers and the TPI Code could form the basis of this without further delay. Until that happens there is a danger that standards of selling via some TPIs could be less than satisfactory.
Independent TPI Code Manager