Calls for action on energy standing charges to small firms

Written by: Rachel Miller

Date: 7 May 2024

An electricity bill warning a customer of price increases

Small businesses in the UK are facing steep rises in the standing charges they pay to energy firms, putting them at risk of closure.

The Federation of Small Businesses (FSB) has written to the energy regulator Ofgem asking it to take action on the standing charges paid by small businesses, many of whom have seen the daily fixed price they pay soar over recent months - regardless of their usage.

"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." Tina McKenzie, FSB policy chair.

The FSB letter highlights the "specific, negative impact standing charges are having on small firms". It comes after the energy secretary, Claire Coutinho, and the minister for affordability and skills, Amanda Solloway, wrote to Ofgem in March, urging the regulator to "ensure that bills are fair and affordable for all consumers".

FSB has pointed out that this issue applies to small firms as well as households. What's more, business customers are not covered by the energy price cap for consumers and FSB reports that many small firms suspect that their costs have been hiked as a result. It also says that small businesses in rural areas have been disproportionately affected by standing charge increases.

Energy price hikes

One small firm reported an increase in its daily standing charge from 70.94p per day in July 2021 to 969.64p per day in September 2023.

Ofgem has asked for views on standing charges via a Call for Input, to which FSB has responded. The cost of utilities continues to be cited as a major driver of increased costs for small businesses, with three in five small businesses (63%) reporting this in FSB's Small Business Index for Q4 2023.

Commenting on the issue, FSB policy chair Tina McKenzie said: "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. 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."

Written by Rachel Miller.

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