Ofgem
What is Ofgem?
Ofgem is the Office of Gas and Electricity Markets, the government regulator for the gas and electricity sectors across Great Britain. It licenses and polices the suppliers and network companies, writes much of the rulebook they follow, and protects energy customers. The one thing it doesn’t do is set the price you pay, which is where most of the confusion starts. This entry explains what Ofgem is, what it covers, and what its role means for a business buying energy.
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Ofgem touches almost every part of how energy reaches your premises, yet most of its work happens out of sight. For a business buying electricity or gas, it helps to understand where the regulator’s reach ends and where your own decisions begin. That line matters more than people expect.
What Ofgem is
Ofgem stands for the Office of Gas and Electricity Markets. It’s the government regulator for the gas and electricity sectors across Great Britain, which means England, Scotland and Wales. Northern Ireland has its own separate arrangements. Ofgem is a non-ministerial government department, so it operates at arm’s length from ministers while still working within a framework set by Parliament.
The body has been around in its current form since 1999, when the old gas and electricity regulators were merged into one. Its decisions are made by an authority known as GEMA, though most people, including most of the energy industry, just say Ofgem. Its job, put simply, is to keep the market working in a way that’s fair to the people and businesses who rely on energy.
What Ofgem does
The clearest way to picture Ofgem’s role is as the body that hands out and polices licences. Every energy supplier selling gas or electricity to your business holds a licence from Ofgem, and that licence comes with conditions attached. The network companies that own the wires and pipes carrying energy to your premises are licensed too. If a licensed company breaks the rules, Ofgem can investigate, impose conditions, and fine.
Beyond licensing, Ofgem writes a large part of the rulebook the market runs on. It sets out how suppliers must treat customers, how billing should work, and what information you’re entitled to. It also regulates how much the network companies can charge for moving energy around, since those firms are regional monopolies with no competition to keep their prices in check. Those network charges feed into your bill, and Ofgem’s job is to make sure they’re set at a reasonable level.
There’s a consumer protection thread running through all of it. Ofgem doesn’t usually deal with individual complaints itself, but it sets the standards that suppliers have to meet, and it steps in when a pattern of poor behaviour shows up across the market. When a supplier goes bust, Ofgem is the body that runs the process of moving those customers to a new supplier so nobody loses their supply.
What Ofgem doesn’t do
This is where a lot of confusion sits. Ofgem doesn’t set the wholesale price of energy. The price of gas and electricity on the wholesale market is driven by global supply and demand, weather, fuel costs and a long list of other factors. Ofgem has no lever to pull on any of that. When wholesale prices climb, your contract price tends to follow, and the regulator can’t simply order them back down.
It also doesn’t decide what individual business contracts cost. There’s no Ofgem rate card for commercial energy. Suppliers price their own contracts based on the wholesale market, network costs, the shape of your usage and their own margin. Two suppliers can quote the same business very different prices on the same day, and both are operating perfectly within the rules.
One point worth holding onto: Ofgem doesn’t license energy brokers or third-party intermediaries in the way it licenses suppliers. We’ll come back to that, because it has real consequences for how you choose who to work with.
The price cap and business energy
You’ve probably heard of the energy price cap. It’s the figure that gets quoted on the news every few months, and it applies to domestic customers on standard variable tariffs. Ofgem sets it, reviews it on a regular cycle, and it limits the unit rate and standing charge a household can be charged on a default tariff.
Here’s the part that surprises business owners. There’s no equivalent cap for business energy. If you run a company, the price cap simply doesn’t apply to you. Commercial contracts are negotiated and priced in a competitive market, and the protection that shields households from runaway default rates was never extended to businesses in the same form.
The reasoning behind that is partly about scale and variety. A household uses energy in a fairly predictable way. A business might run a small office or a cold store working through the night, and the range is enormous. A single capped rate would struggle to fit all of that. The practical upshot for you is that there’s no safety net rate to fall back on. If your contract ends and you slip onto a default arrangement, you could find yourself paying an out-of-contract rate that’s far higher than anything you’d have agreed to. Nobody caps that for you. The responsibility to keep an eye on your renewal sits with the business.
Microbusiness protections
Not every business is left entirely to fend for itself. Ofgem has carved out a set of extra protections for what it calls microbusinesses, and if you qualify, they’re genuinely useful.
A microbusiness is defined by fairly low thresholds. Broadly, it’s a business with a small number of employees, or modest annual turnover or balance sheet, or one that uses a limited amount of gas or electricity each year. The exact figures shift over time, so it’s worth checking where the lines fall, but a corner shop, a small café or a one-van trade business will usually count.
If you’re a microbusiness, your supplier has to give you clearer information about your contract, including the end date and the notice you need to give. Suppliers also have to take some responsibility for the brokers they work with, and there are rules around how contracts can be renewed so you’re less likely to be rolled silently into a new fixed term. These protections don’t fix your price, and they don’t replace the work of comparing options, but they do tilt the playing field a little in favour of the smaller customer.
Standards of conduct and complaints
Ofgem requires suppliers to meet what are known as standards of conduct. In plain terms, suppliers have to treat business customers fairly, communicate clearly and act in good faith. That covers things like accurate billing, honest information about contracts, and not making it unreasonably hard to leave.
What happens when something goes wrong is a common source of confusion. Ofgem itself isn’t the place you take an individual complaint. The first step is always your supplier’s own complaints process. If you’ve gone through that and either you can’t reach a resolution or eight weeks have passed, the matter can usually be escalated to the Energy Ombudsman. The Ombudsman is independent, its service is free to you, and its decisions are binding on the supplier. That’s the route that actually settles disputes, not Ofgem.
Ofgem’s interest in complaints is broader. It watches the patterns. If lots of customers are reporting the same problem with the same supplier, that’s the kind of thing that prompts the regulator to investigate the company’s conduct across the board.
Ofgem and energy brokers
This is the gap that catches the most businesses out. Suppliers are licensed by Ofgem. Energy brokers, also called third-party intermediaries, are not licensed in the same way. There’s no equivalent licence a broker has to hold before they can arrange a contract on your behalf.
That doesn’t make every broker a problem. Plenty are honest, knowledgeable and genuinely useful to a busy business. But it does mean the protections you might assume are in place often aren’t. A broker’s commission can be built into your unit rate without you ever seeing the figure, and the regulatory backstop you’d expect from a licensed firm isn’t there in the same form.
So the responsibility falls back on you to check who you’re dealing with. It’s worth understanding what an energy broker actually does before you sign anything, and there are sensible steps you can take to check a broker is legitimate. Ask how they’re paid. A broker that’s open about its commission and happy to show you the numbers is telling you something useful. We set out how we make our money for exactly that reason. When the regulator isn’t policing this corner of the market, transparency from the broker has to do the job instead.
What it means for your business
Put all of this together and a fairly clear picture emerges of where you stand. Ofgem keeps the suppliers and networks honest, sets the rules they follow, and steps in when companies behave badly. It does not set your price, it does not cap your business rate, and it does not vet the broker who sends you a quote.
What that leaves with you is the decision-making. The timing of your renewal, the comparison of contracts, the choice of who to trust with your procurement, all of that sits on your side of the line. It’s also why reading your own bills properly matters. A habit like bill validation, checking that what you’ve been charged matches what you agreed, is one of the few protections entirely within your control. And small details add up. Knowing how VAT on business energy works, for instance, can change what your real cost looks like.
None of this is a reason to feel exposed. It’s a reason to pay attention. The regulator does the heavy lifting on market conduct. The decisions that move your actual costs, those are yours, and they reward a bit of attention at the right moment. If you want a clearer sense of how the commercial market fits together, our business energy pages are a useful place to look next.
Frequently asked questions
Is Ofgem a government body?
Yes. Ofgem is a non-ministerial government department. It works within a framework set by Parliament but operates at arm’s length from ministers, and its decisions are made by an authority known as GEMA.
Does Ofgem set the price I pay for business energy?
No. Ofgem doesn’t set wholesale prices or individual contract prices. Suppliers price their own commercial contracts based on the wholesale market, network costs, your usage and their margin. There’s no Ofgem rate card for business energy.
Does the energy price cap apply to my business?
No. The price cap applies only to domestic customers on standard variable tariffs. There’s no equivalent cap for business energy, so commercial contracts are priced in a competitive market with no capped fallback rate.
What does Ofgem actually regulate?
Ofgem licenses and regulates energy suppliers and the network companies that own the wires and pipes. It sets market rules, controls how much networks can charge for moving energy, and steps in when licensed companies break the rules.
What is a microbusiness under Ofgem’s rules?
A microbusiness is one that falls under low thresholds, broadly a small number of employees, modest turnover or balance sheet, or limited annual energy use. The exact figures change over time, so it’s worth checking, but most very small businesses qualify.
What extra protections do microbusinesses get?
Suppliers must give microbusinesses clearer contract information, including the end date and notice required. There are also rules on renewals and some supplier responsibility for the brokers they use. These don’t cap your price but do help the smaller customer.
Does Ofgem handle my complaint about a supplier?
Not directly. You start with your supplier’s own complaints process. If you can’t resolve it, or eight weeks pass, you can usually escalate to the Energy Ombudsman, whose decisions are binding on the supplier and free to you.
What is the difference between Ofgem and the Energy Ombudsman?
Ofgem regulates the market and sets the rules suppliers follow. The Energy Ombudsman is the independent body that settles individual disputes once you’ve exhausted your supplier’s complaints process. The Ombudsman resolves your specific case, Ofgem doesn’t.
Does Ofgem license energy brokers?
No. Brokers, also called third-party intermediaries, aren’t licensed by Ofgem in the way suppliers are. That’s why checking how a broker is paid and whether it’s transparent matters before you sign anything.
What happens if my energy supplier goes out of business?
Ofgem runs the process of moving affected customers to a new supplier so nobody loses their gas or electricity supply. It appoints a replacement through what’s known as the supplier of last resort process.
Are standards of conduct part of Ofgem’s rules?
Yes. Ofgem requires suppliers to meet standards of conduct, meaning they have to treat business customers fairly, communicate clearly and act in good faith. That covers accurate billing and honest contract information.
If Ofgem doesn’t cap business prices, how do I avoid overpaying?
The responsibility sits with you. Keep track of your renewal date so you don’t slip onto a high out-of-contract rate, compare contracts before you commit, validate your bills against what you agreed, and check that any broker you use is open about how it’s paid.