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Introduction to Alternative Dispute Resolution
The Alternative Dispute Resolution Scheme (ADR) was introduced by Ofgem as part of their Microbusiness Strategic Review, to help streamline the resolution process between microbusiness customers and energy brokers.
From December 2022, the updated rules stated that Third Party Intermediaries (TPIs) such as energy brokers, must be registered with a qualifying Alternative Dispute Resolution scheme with the Energy Ombudsman, in order to work with energy suppliers.
To help you stay up to date with the changes, we’ve put together a handy list of FAQs covering everything you need to know about Alternative Dispute Resolution schemes.
Who is the Energy Ombudsman?
The Ombudsman is an independent dispute resolution service that operates within the energy sector, as well as other public sectors in the UK. In 2015, Ofgem appointed the Ombudsman services as the Alternative Dispute Resolution body for the energy sector.
What is the Definition of a Microbusiness?
A microbusiness is defined as a non-domestic consumer who meets the following criteria:
- Employs fewer than 10 employees (or their full-time equivalent)
- Has an annual turnover or balance sheet of less than €2 million
- Uses no more than 100,000 kWh of electricity per year
- Uses no more than 293,000 kWh of gas per year
Why Was the Alternative Dispute Resolution Scheme Introduced and Who Does It Help?
The Alternative Dispute Resolution Scheme was introduced in 2022 when Ofgem reviewed and updated its Microbusiness Strategic Review. This both helps protect microbusinesses and helps brokers improve their service and processes.
The scheme:
- Creates greater visibility and full disclosure of TPI costs
- Means microbusinesses no longer have to submit contract termination notices
The scheme plays an important role in facilitating dispute resolution and ensuring fair practices within the energy industry between microbusinesses and energy brokers.
What Does the Alternative Dispute Resolution Scheme Mean for Brokers?
Ofgem has ruled that energy suppliers will only be allowed to work with brokers who are registered to the new, approved dispute resolution scheme.
Although the initial deadline of December 2022 has been passed, Energy Brokers can still register to the Alternative Dispute Resolution scheme if they want to work with microbusinesses.
Brokers can apply for the Alternative Dispute Resolution scheme here.
What Does the Alternative Dispute Resolution Scheme Mean for Microbusinesses?
The Alternative Dispute Resolution scheme aims to provide greater protection for microbusinesses with increased broker transparency and freedom to switch suppliers without hassle.
Do All Brokers Have to Register for the Alternative Dispute Resolution Scheme?
Yes, all brokers who wish to continue working with energy suppliers to provide their services to microbusinesses must register with the scheme.
Once you register, you will be able to access a range of benefits such as insights into how you can improve your service and all-around experience for your customers.
Do Brokers Who Only Work with Non-Microbusinesses Need to Apply to the Alternative Dispute Resolution scheme?
No, you only need to register for the ADR scheme if you have Microbusiness contracts. Non-microbusinesses are unable to raise a dispute and complain through the Alternative Dispute Resolution scheme.
What Are the Costs Involved?
According to the Energy Ombudsman, there are subscription and case fees involved for brokers applying for the Alternative Dispute Resolution scheme.
Here is a full cost breakdown of fees for the first year:
- Annual membership subscription- £300/ member
- Case fees- £340/case (based on energy supplier charges)
- Reduced case fee- £170 (charged for Facilitated Case Resolution (FCR))
How To Raise a Case with the Alternative Dispute Resolution Scheme for Microbusinesses
Before contacting the energy ombudsman, you should try to resolve your issue directly with your supplier. Once you have contacted them, your supplier has up to eight weeks to resolve the issue, unless they send you a deadlock letter allowing you to contact the ombudsman sooner.
After eight weeks, if your issue is still unresolved, you can register your dispute with the Alternative Dispute Resolution scheme. You will then need to supply your evidence to build your case, which will then be reviewed, and an impartial decision will be made. This decision will then be communicated to both you and your supplier.
