At the end of October, the Government published its long-awaited plan for Third-Party Intermediary (TPI) regulation in the retail energy market, following a consultation that ran from September – November last year. In this article, Brevia Energy sets out the key announcements from the Government’s response and what this means for companies operating in the sector moving forward.
Establishing Ofgem as the TPI Regulator
The Government confirmed that it will bring forward legislation to formally appoint Ofgem as the regulator for TPIs when Parliamentary time allows. This move follows responses to the consultation that highlighted increasing concerns over non-transparent practices, mis-selling, and a lack of consumer protection in parts of the TPI market.
In preparation for its new role, Ofgem will conduct a detailed market survey beginning in the first half of 2026. This survey will aim to build a comprehensive picture of the TPI landscape, quantify market activity, and identify areas of consumer harm.
Once established as regulator, Ofgem will be empowered to:
- Create and enforce high-level principles for TPI conduct.
- Develop specific rules outlining permissible and prohibited behaviours.
- Implement a registration process requiring all TPIs to be authorised before operating.
These enforcement powers will include the ability to request information, commission independent “skilled person” reports on aspects of a TPI’s operation, and impose sanctions such as fines, redress orders, or market exclusion.
Importantly, the response proposes that the cost of regulation will be borne by the TPI market itself. Ofgem will recover its expenses through annual fees paid by TPIs, with a structure similar to the Financial Conduct Authority’s authorisation model. The Government is also exploring a cost-recovery mechanism for investigations, incentivising compliance and cooperation among TPIs.
However, there are concerns regarding the urgency of these actions, with some in the industry questioning the delay in conducting the market survey until the first half of 2026 – and this action being the only one with a definitive deadline in the consultation. Additionally, there is the potential for the appointment of Ofgem as the regulator of TPIs to be indefinitely delayed due to lack of available the Parliamentary calendar.
Key Issues Driving Regulation
The Government’s response acknowledges that while some TPIs and industry bodies—such as the Utilities Intermediaries Association and efforts conducted through the Retail Energy Code Company—have taken voluntary steps to improve standards, the sector still faces systemic challenges.
The main issues identified include:
- Misaligned incentives and conflicts of interest: The TPI market currently does not consistently align companies’ financial incentives and good consumer outcomes.
- Opaque contracting and mis-selling: Instances of TPIs recommending unsuitable contracts for commission incentives remain a concern.
- Limited support for vulnerable customers: TPIs often lack the capacity to identify and support customers with additional needs.
By introducing statutory regulation, the Government aims to ensure a fairer, more transparent market that prioritises consumer protection and trust.
A Principles-Based Regulatory Framework
Ofgem’s regulatory approach will be built around three main pillars:
- Principles: Broad behavioural standards against which TPIs can be held accountable. These will provide a foundation for consumer redress and enforcement action.
- Specific Rules: Detailed regulatory requirements to clarify and supplement the overarching principles, potentially including outcome-based obligations.
- Registration Requirements: A formal authorisation process assessing firms’ compliance, governance, and suitability. Existing TPIs will have a 12–18 month “sunrise period” to register once Ofgem is appointed as regulated.
Next Steps
While awaiting legislative appointment, Ofgem will undertake a detailed market survey, which the Government expects to begin in the first half of 2026. Ofgem’s goals will include building a robust quantitative model of the structure of the TPI market, and the relative prevalence of harms. Beyond this market survey, the Government response provides few clear ideas of timelines for the implementation of their announcements.
Companies operating in the sector must ensure they are actively involved in the next stages of the process to help shape the design of the new regulatory framework. Continued engagement with Government and Ofgem will be essential to securing a system that supports effective regulation and long-term stability for the industry.
Brevia Energy is a dedicated division of Brevia Consulting, and has a longstanding reputation for its expertise and experience in the Energy Sector.
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