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Small businesses hit with 13-fold increase in energy bills in just three years

Small businesses are calling on energy regulator Ofgem to address the escalating standing charges appearing on their energy bills. An increasing number of these enterprises have reported dramatic surges in standing charges, some experiencing an increase as much as 13 times higher than three years ago.

In response to this, the Federation of Small Businesses (FSB) has reached out to Ofgem with a plea for action regarding the rapidly inflating standing charges faced by small firms, especially those situated in more rural areas.

One notable case involves a business owner who reported an extreme hike in standing charge, leaping from 70.94p per day in July 2021 to a staggering 969.64p per day by September 2023, marking a more than thirteen-fold increase.

Standing charges, which are applied daily irrespective of energy usage, cater to several costs including energy supply to properties and the building of new network infrastructure. These charges also can be used to cover costs in instances where energy suppliers face insolvency.

While the price cap has seen consumers’ bills kept in check, no such limit is applied on the bills of small businesses.

Tina McKenzie, policy chairwoman at FSB, voiced her concerns, stating: “We want Ofgem to do a thorough review of standing charges for businesses as well as consumers, for better transparency and to discern whether energy companies are behaving fairly towards their small firm clients.”

She further pointed out: “Small business energy customers behave in a way more akin to consumers than big businesses, lacking the resources, the expertise and the buying power necessary to get the best possible deal out of their energy suppliers.”

“However, they do not benefit from anything like the same level of protection as that rightly available to households, leaving them caught between two stools.”

“Many small businesses could be forgiven for suspecting that they have been seen as something of a soft target for price hikes in their standing charges, and they do not have a full picture of where the money they pay on a daily basis is going something that needs to change.”

Ofgem sought public opinion on standing charges late last year, which led to responses from over 20,000 individuals.

The regulator announced its aim to stimulate a discussion on how current charges are organised and was open to ideas for alteration.

Traditionally, standing charges are higher in outlying areas due to the increased supplier costs per home.

This charging system is viewed by the FSB as unfairly impacting businesses in rural locales.

The group pointed out this setup deepens the rift between urban and rural regions and “[undermines] efforts to level up more remote parts of the UK”.

Addressing these concerns, an Ofgem spokesperson said: “We’re assessing the standing charge system overall, including tackling issues faced by non-domestic consumers.”

“We’re grateful for FSB for responding to our consultation and we’re looking at its ideas.”

“We agree too many businesses get unexplained price hikes from suppliers or are ripped off by brokers that’s why we’re putting tough new rules in place from July to resolve disputes and get greater clarity on fees.”

“We published a detailed non-domestic market review last year and are working with ministers, industry and businesses on the additional price protection and bill transparency they’re calling for.”


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