Prominent business groups have called on Britain’s energy regulator to take swift action against suppliers found to be mistreating corporate customers, as high gas and electricity costs continue to put many small businesses at risk of collapse.
In a letter seen by the Financial Times, the Institute of Directors urged Ofgem to “secure a well-functioning market for non-domestic customers”, after a poll of its members found that around one in five had been subject to “at least some form” of the behaviour. negative by their energy supplier.
The most common problems cited by nearly 1,000 small business leaders surveyed in January included demands that larger portions of bills be paid in advance, refusal to negotiate payment terms and refusal to renew contracts.
Other IoD members pointed to the failure to process refunds and tariff increases, as well as suppliers’ move to bill monthly instead of quarterly, while noting that energy costs remained double the previous year.
The letter comes after Ofgem was accused of being “asleep at the wheel” following reports of malpractice in the domestic market, and before the conclusion of a review by the watchdog into the business market.
Chancellor Jeremy Hunt has called for the findings ahead of the spring budget on March 15, with the government set to cut energy subsidies for companies in April.
Discounts on bills – which came into effect after the Ukraine war sent prices soaring – are expected to be lower than they are today, although there will be additional support for businesses in “energy-intensive” industries such as manufacturing.
In a separate IoD survey assessing optimism among business leaders for the UK’s economic outlook, more than 40 per cent cited energy costs as one of the main “negative issues” facing organisations.
The IoD also warned that its members were made to sign up for energy supply contracts that forced them to include “take or pay” clauses, where they were forced to take an agreed amount of energy from the seller on a certain date. or pay a set penalty.
The business group says this practice undermines the ability of non-domestic customers to reduce their energy consumption and transition to low-carbon alternative energy sources.
In the letter, IoD director general Jonathan Geldart called on regulators to identify and take action to address problems raised by businesses.
Geldart told the Financial Times: “At a time when energy prices are rising, it is important that energy regulators ensure that unnecessary burdens on businesses are removed.”
Ofgem said it was “recognised that some businesses are having trouble getting fixed-rate energy deals and some are being asked to pay large deposits by some suppliers”.
“We are working with the government and stakeholders to determine if further action or assistance is needed to help businesses, in addition to looking at compliance with existing requirements,” he added.
Writing to Ofgem in January, Hunt said there were concerns “about the particular challenges some nondomestic customers face in the energy market. [relating] for price and availability rates, including increased fixed costs, prohibitive contract renewal terms, and in some cases the decision of individual suppliers to withdraw from supplying certain sectors.
In response, Ofgem chief Jonathan Brearley confirmed that the regulator is examining the non-domestic market and will launch a call for evidence on companies’ experience with suppliers.
“We will look at where we may need to make changes to regulations and also check whether suppliers are complying with existing requirements,” Brearley said.