Following on from a consultation in February, Ofwat has now published its finalised principles for a voluntary code of conduct for Third Party Intermediaries (TPIs) to protect customers when the business retail market opens from 1^st April 2017.

TPIs are common in a wide variety of markets including those with similar structures to the business retail market, such as energy and financial services.

Introducing the principles, the water industry regulator said:

“The use of TPIs is a key opportunity for customers to engage through a forum they already use for other services and may also offer a range of services bundled and sold together including other utilities. TPIs have therefore been helpful in markets by enabling customers to compare alternative offers and in enabling new offers to be seen by customers. However, in some instances there have also been concerns about the way certain TPIs have operated and how this has impacted customer decisions.”

The regulator sees the ability to take enforcement action against TPIs as an important element of customer protection, particularly when engagement with a TPI may be the first interaction a water or wastewater customer has with the business retail market.

Ofwat received twenty two responses from interested parties, including licensed retailers, incumbent water companies, energy companies, consumer groups, TPIs and the Information Commissioner’s Office (ICO).

Respondents supported Ofwat’s proposal for a set of tailored principles that used as their base the principles from Customer Protection Code of Practice (CPCoP) for business customers, but allowed additional principles that are directly relevant to TPIs.

They raised the following specific issues which they believed need to be addressed through the principles, particularly given the concerns in other retail markets (such as the markets in energy and financial services):

• A principle that all water and wastewater retailers must respect and comply with the wishes expressed in a customer authorised letter of authority, whether or not it complies with the format proposed in Ofwat’s consultation;
• Differentiating in the principles between the different business models of TPIs and their degrees of independence from the water and waste water retailers. Specifically, between TPIs who directly represent business customers and act as procurers of products and services on their behalf (and who are often paid directly by customers and known as first party intermediaries), and TPIs who act as sellers of retailers’ products and services to customers (and who are often recompensed by way of supplier commissions);
• A principle that would require TPIs to confirm any agreement with a business customer either in writing or by retaining recordings of agreements made by phone, as well as a requirement to confirm the method of remuneration any TPI receives from a retailer for such an agreement;
• Specific principles that mirror and reinforce the protections for micro-business customers in the CPCoP; and
• Specific principles that give guidance on the unsuitability of and restrictions on cold calling or unsolicited approaches.

However, the regulator has opted not to add any additional principles, saying:

“We believe that adding further principles on the specific issues raised will not provide customers with any additional protections and may lead to the principles being overly prescriptive.”

“The changes we have made to the principles have therefore been limited to ensuring that the language is clear and unambiguous.”

The finalised principles are:

1. TPIs shall be fair, transparent and honest.

2. Communication with customers (business, charity and public sector) shall be in plain and clear language.

3. All information provided to customers by a TPI shall be reliable, accurate, complete, timely and not misleading. Such information shall be made through appropriate channels and enable customers to make informed choices.

4. TPIs shall not offer products that are unnecessarily complex or confusing.

5. TPIs shall not sell a customer a product or service that is not fully understood by that customer, nor sell a product or service that is inappropriate for that customer’s needs and circumstances.

6. TPIs shall not exaggerate the savings that could be achieved by switching, but shall be as accurate as possible.

7. TPIs shall inform any micro-business customers that they have a 14 day cooling off period.

8. TPIs shall cancel any mis-sold contract without penalties.

9. TPIs shall respond to customers in an appropriate and timely manner.

10. Customer service arrangements and processes shall be accessible to and effective for customers.

Ofwat will shortly publish its final approach to monitoring the effectiveness of the business retail market which will include collecting information from retailers, and customers themselves, on relevant issues and complaints, including those related to TPIs.

The regulator said the information may be used to consider the ongoing appropriateness of its approach to TPIs. Monitoring work will also involve liaising with other regulators and the CMA, particularly Ofgem, given the likely bundling of energy and water services, to ensure consistency in the application of the principles across markets and gather intelligence on potential cross-sector issues.