Smaller firms suffer higher energy prices

25 February 2010

Small firms are less likely to secure lower energy price deals than their larger counterparts, a leading business group has claimed.

The Forum of Private Business (FPB) said that figures released by the government show that average electricity prices for SMEs climbed by 15 to 17 per cent between the third quarter of 2008 and the same period of 2009.

However, large firms incurred price hikes of between 9 per cent and 11 per cent, while the very largest companies only saw prices go up by an average of 5 per cent during the same period.

The cost of gas revealed an even more alarming picture. Data from the Department of Energy indicated that average non-domestic gas prices rose by 8 per cent for the smallest businesses even though they actually declined by between 14 per cent and 52 per cent for all other commercial customers.

Research carried out by the FPB suggested that eight out of ten small firms (84 per cent) regard utility costs as a "major concern".

The FPB pointed out that many of their members have been in contact to say that energy companies have tied them to often expensive 'rollover' contracts with little or no warning, while others reported being sent huge back-dated bills following meter errors.

Nick Palin, the FPB's finance director, commented: "While the big energy companies always pass on wholesale price increases in full, the same cannot be said when prices fall. By refusing to play fair some utilities giants have forced costs on small businesses they can ill afford."

A number of measures aimed at safeguarding the interests of smaller firms came into force in January this year under the instruction of Ofgem, the energy regulator.

The rules limit the practice of imposing automatic rollover contracts, obliging energy companies to inform business customers fully and clearly of any contract changes and to provide them with a minimum of 30 days before the end of their notification period so that they have sufficient time to switch to another supplier.

The regulations also prohibit unjustified price differences between tariffs and payment types.

Mr Palin urged small firms to look for alternative and cheaper energy supplies.

He said: "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."