Consumer Focus Warns Small Businesses Face Shock Energy Bills
The consumer group, Consumer Focus, has warned that thousands of small businesses could face damaging energy bills because they have been undercharged by suppliers for years.
Consumer Focus said its helpline received just under 2,000 calls last year, from small businesses complaining that they got unexpected bills because their gas and electricity charges had been underestimated for years. Consumer Focus said that when many small businesses spend around £10,000 a year on gas and electricity any errors mount up quickly. It means small firms could be faced with the shock of back dated bills for thousands of pounds.
Some of these small firms are microbusinesses such as corner shops or hairdressers and have only one or two employees. Therefore the prospect of back dated energy bills could mean they are dealt a massive financial blow.
As a result of its recent energy review Ofgem has proposed certain measures on energy brokerage and also more transparent terms and conditions for small businesses. Despite these suggestions, back dating bills is not one of Ofgem’s proposals and has not yet been dealt with.
The problem is that energy companies can send out back dated bills for businesses for as far back as six years. In comparison domestic customers can only expect back dated bills for one year’s energy usage. To add to the woes of a small business – once they have received an outstanding bill they can demand immediate payment.
Quite often the reason small businesses are billed incorrectly is down to the business electricity suppliers or gas suppliers – it’s as a result of their mistake and not because small businesses want to avoid paying their business electricity or business gas bill and so provide incorrect readings. Consequently, Consumer Focus wants small businesses to have the same protections as consumers. This would include only back-billing small businesses for a year rather than six if the supplier has made a mistake and ensuring that suppliers consider a businesses’ ability to pay the outstanding debt. This may mean suppliers have to set a sensible timescale for repayment instead of asking for the full repayment straightaway.
The head of Energy at Consumer Focus, Audrey Gallacher, said “Small businesses need all the help they can get in these difficult times if they are to help drive the economic growth we need. Getting a bill for thousands of pounds out of the blue is a nightmare scenario for any small business, especially in these difficult times. With suppliers able to go back six years, supplier mistakes can add up to big debts that could potentially cripple some firms”. She added “It’s important for businesses to ensure they are paying the right amount, but energy suppliers shouldn’t treat small businesses in the same way as they would multi-national corporations. The back-billing code of practice would protect firms from large unexpected bills, and give suppliers the incentive to get billing right first time, every time”.
Meanwhile the chairman of Environment and Energy Policy at the Federation of Small Businesses, David Caro said “Small businesses have suffered unfair and non-transparent contract terms from uncaring energy suppliers for a long time. Although a micro business’ behaviour and consumption is very similar to that of a customer in the domestic market, they are not covered by the same protections and safeguards, which makes small businesses even more vulnerable. There is a need for a radical shake-up of the practice of estimated billing, especially when the energy suppliers are in the wrong. A large unexpected energy bill, particularly in these difficult trading times, can be as serious as the last nail in the coffin for a small firm, which is then forced out of business through no fault of its own”.
Utility Exchange recently reported that there have been calls for Ofgem to ban rollover energy contracts for small business gas and business electricity consumers so that they don’t get locked into expensive contracts. While Ofgem has said it wants to increase competition in the energy market to ensure consumers get the cheapest energy deals it appears there’s still more work to do to help business energy consumers. Getting rid of rollover contracts for businesses with ten employees or more and preventing suppliers from back-billing, are just two ways in which Ofgem could help small businesses.