Figures show small firms losing out on energy deals compared to big businesses
The latest industry data available from the Government shows that average electricity prices for small and medium sized firms increased by 15-17% between the third quarter of 2008 and the same period of 2009. However, prices increased by 9-11% for large businesses and by just 5% for the UK’s biggest companies.
According to the figures from the Department of Energy and Climate Change average non-domestic gas prices went up by 8% for the smallest businesses but fell by between 14 and 52% for all other commercial customers.
The UK’s biggest energy companies have come under fire after revelations they are not passing on cuts in wholesale energy costs to domestic consumers and are instead raising their prices to boost their profit margins.
The situation has been even worse for small businesses. Between 2003 and 2008 average electricity prices in the energy-intensive manufacturing sector soared by 138% and average gas bills by 162%.
In recent research carried out by the FPB more than 84% of respondents cited rising utilities costs as a ‘major concern’.
In addition, many small firms have contacted the FPB in recent months to report that energy companies have tied them to often expensive ‘rollover’ contracts with little or no warning. Others reported being unfairly handed huge back-dated bills following meter errors.
“While the big energy companies always pass on wholesale price increases in full the same cannot be said when prices fall,” said the FPB’s Finance Director Nick Palin. “This is the tip of the iceberg. By refusing to play fair some utilities giants have forced costs on small businesses they can ill afford.”
The energy regulator Ofgem is attempting to boost competition by creating transparency in energy cost forecasts, in order to allow smaller providers to buy in advance, and increasing liquidity in wholesale markets. Following the recent price revelations it said customers can make significant savings by switching energy suppliers.
Following the FPB’s submission to its recent energy market probe Ofgem announced a series of measures designed to protect small businesses from the actions of energy companies.
The measures, which came into force on 18 January 2010, affect the way energy is sold and marketed to small businesses.
This includes limiting the use of automatic ‘rollover’ contracts. Now, energy companies must ensure their business customers are fully aware of any contract changes and give them enough time (a minimum of 30 days before the end of their notification period) to switch to another supplier.
They also prohibit unjustified price differences between tariffs and payment types and give firms more flexibility to switch suppliers.
“Ofgem’s new small business protections are welcome and should help to improve competition and choice in the market, but the best advice to any business owner struggling to control costs is to shop around and switch suppliers for the best deal possible,” added Mr Palin.
The FPB’s utilities adviser Colin Beake, of Utility Options, explained: “Big businesses can afford to employ purchasing managers whose job is to ensure they get the best prices on utilities, but most small firms do not have that luxury.
“Business owners are busy doing what they do best – running their business. Often, this means contracts roll over leaving them with costly bills. The FPB can help them make up the ground lost to bigger companies on energy prices by acting on their behalf.”
Members of the FPB can take advantage of a free, independent service from Utility Options, a utilities consultancy which monitors when utilities deals are up for renewal and negotiates detailed contracts and service agreements. In addition, Utility Options will shop around on behalf of a business to secure the best price possible.
For more information, call the FPB on 0845 130 1722 (members) or 0845 612 6266 (non-members), or click www.fpb.org.