SMEs call on Ofgem for protection over energy contracts


Utilities remain a cost driver for a majority of small firms, according to new research by the Federation of Small Businesses. Its latest Small Business Index shows over 57% of small businesses cited utilities as the main cause for rising business costs in Q3 this year, down slightly from 62% the previous quarter.

Memories of last year’s energy price crisis have not faded for small businesses, and this illustrates the need for firmer action from Ofgem to protect the small business community against mis-selling energy contracts and being trapped in unaffordable tariffs as we head into winter.

Microbusinesses should be given more flexibility to cancel a contract through access to a 14-day cooling off period. This would put them on par with domestic customers.

Standing charges continue to be an issue – we have heard examples of a small garden centre paying £1.20 standing charges per day. FSB would like to see a freeze on standing charges over the winter period due to the current economic climate.

Some small businesses are still trapped in the high, fixed energy tariffs from 2022 and unable to benefit from the lower wholesale energy prices we see today. In one case, an independent retailer pays 75p per kWh for electricity while a small pool club is charged 66p.

FSB National Chair Martin McTague said: “While the fall in October’s energy price cap contributed to the slowdown in inflation, it’s important to point out that business tariffs are not protected by the cap, and many small firms are still living with higher utility bills, putting them under continuing stress.

“Giving microbusinesses the flexibility to cancel a contract through a 14-day cooling off period would deter pressurised sales tactics and help avoid some of the difficulties we saw last year when small firms found themselves trapped on high fixed tariffs.

“Freezing standing charges is another way to help cut energy bills. This is a fee small firms have to pay regardless of their energy usage and has been used by energy suppliers as a back-door way to inflate prices. We therefore welcome Ofgem’s consultation on potentially changing the standing charges system.

“Where relevant, we continue to call on energy suppliers to adopt our Ofgem-backed proposal and allow small firms which are still trapped in fixed contracts signed during last year’s market peak to extend their terms but at a lower and blended rate – between their original fixed rate and the lower wholesale energy prices we saw today.

“Small businesses are looking at Ofgem for a vital protection this winter. We look forward to continuing engaging the regulator on this further.”