Energy Ombudsman Increases Maximum Award for Small Business Disputes to £20,000

Key Changes to the Energy Ombudsman’s Maximum Award

From 19 December 2024, small businesses will benefit from a significant change in the Energy Ombudsman’s dispute resolution process. The maximum award for non-domestic energy disputes will increase from £10,000 to £20,000, reflecting the growing energy consumption and financial stakes for small businesses.

Why Is This Change Happening?



The Energy Ombudsman’s remit is expanding to include small businesses under the Ofgem small business definition. This increase ensures that small businesses can resolve disputes effectively, as their energy needs and bills are typically higher than microbusinesses.

The Decision-Making Process

To ensure the change is fair and beneficial, the Energy Ombudsman invited feedback from stakeholders between 4th September and 2nd October 2024. Here are the key insights:

• Support for the Increase: 5 organisations agreed that the increase to £20,000 was reasonable given the higher energy usage of small businesses.

• Doubts About Necessity: 3 organisations disagreed, citing insufficient evidence and concerns about inflationary impacts on award values.



• Calls for Further Increase: One response suggested the maximum award should rise to £50,000.

After careful consideration, the decision was made to increase the maximum award to £20,000 for all non-domestic disputes, ensuring fairness across microbusinesses and small businesses.

Key Points Behind the Decision

1. Existing Large Awards: The Energy Ombudsman frequently issues awards near the current limit for microbusinesses, showing a need for an increase.
   
   
2. Preventing Resolution Barriers: Without the increase, small businesses might not see fair outcomes for disputes involving larger sums.
   
   
3. Avoiding Inconsistency: The same maximum award will apply to microbusinesses and small businesses to prevent unfair discrepancies.

The Energy Ombudsman assures that this change will not cause award inflation, as awards will still be based on actual financial losses and time-and-trouble compensation.

What About the Broker Scheme?

For disputes involving brokers, the maximum award will remain at £10,000. This decision reflects the complexity of the broker market, where multiple alternative dispute resolution (ADR) schemes operate. A review may follow pending the outcome of the Department for Energy Security and Net Zero’s consultation on broker regulation.

What This Means for Small Businesses

Small businesses can now have greater confidence that their disputes will be fully resolved without financial limitations acting as a barrier. This change aligns with the Energy Ombudsman’s goal to provide fair outcomes and increased support for small businesses navigating energy issues.

Preparing for the Change

The new maximum award limit of £20,000 will take effect for all new non-domestic energy disputes from 19 December 2024. The Energy Ombudsman will review the limit after six months to ensure it remains fit for purpose.



For more details on this change and the small business remit extension, visit the official Energy Ombudsman update page here.

Conclusion

The increase in the maximum award for non-domestic energy disputes marks a significant step forward in supporting small businesses. As your trusted energy partner, The Smart Energy Company is here to help you navigate energy contracts, disputes, and supplier changes with confidence.

If you need help reviewing your energy contracts or handling disputes, get in touch with us today for a free consultation.