Today the Utility Regulator publishes its final decision on 'The application of exit fees in the small business energy market', which provides detail on when the application of an exit fee is appropriate. This follows a consultation published earlier this year.
The decision set out in this paper will result in suppliers continuing to be able to impose an exit fee where a small business customer leaves their contract before the end of the fixed term. This is a continuation of the status quo.
It also will see Measure 5 on exit fees from the previous decision paper no longer being implemented. This is in the context of the obligation on energy suppliers to comply with the existing requirement that, where an exit fee is being applied, then a supplier must be clear and transparent about this upfront in the contract terms and conditions. This obligation is contained in licence condition 27 paragraph 1 in electricity supply licences and 2.18.1 in gas supply licences.
We published our final decision paper – 'Measures to Enhance the Operation of the Small Business Energy Market' in September 2018. However implementation of the licence modifications were postponed as we published a consultation as an addendum to that decision paper. This addendum explored the specific issue of the application of exit or contract termination fees in the small business energy market and their appropriateness in the context of a fixed term contract. Stakeholders were asked to provide their views.
Licence modifications to implement measures 2, 3, 4 and 7 as set out in this paper will be issued in Q4 of 2019.