The Federation of Small Businesses has called for energy regulator Ofgem to take action on the standing charges paid by small businesses, many of whom have seen soaring daily fixed prices.
The Federation is backing up requests from Ministers to Ofgem chief exec Jonathan Brearley that he ensures energy bills are fair an affordable, and has told him he must recognise the “specific, negative impact standing charges are having on small firms”.
FSB’s Policy Chair Tina McKenzie said: “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.
“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.
“Small firms were put through the wringer by the energy price crisis, which sadly spelled the end for many otherwise viable businesses who saw their utility bills become completely unmanageable.
“The price increases which led to the crisis have thankfully eased off to an extent, but many thousands of small firms are now stuck on tariffs which are far higher than before, which is a leading driver of cost increases.
“While it’s possible for most firms to cut their energy use – something which many did in response to spiralling bills – the standing charge must be paid day in, day out, so ensuring that small firms aren’t being fleeced is absolutely vital.
“We’re very keen to hear what Ofgem’s next steps in this area will be, to ensure that small firms pay standing charges that are fair and transparent, no matter where they’re based.”
One small firm whose owner got in touch with FSB reported an increase in the business’s daily standing charge from 70.94p per day in July 2021 to 969.64p per day in September 2023 – over 13 times higher.
Standing charges are used to fund network infrastructure, operating costs, and policy costs for schemes such as the Warm Home Discount, but this can be difficult for small firms to comprehend. Business customers are not covered by the energy price cap for consumers and many small firms suspect that their costs have been hiked as a result.
