Energy suppliers are under fire as customers have seen their energy bills rise by an extra £2,500 a year. The Federation of Small Businesses (FSB) claims firms are raising standing charges as a way to inflate bills.
Recently, industry regulator Ofgem launched a consultation examining the standing charges system with FSB highlighting complaints from small business owners. Some firms are reporting 12-fold increases to their gas and electricity costs regardless of their energy usage.
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Small business owners are under financial pressure more than ever before
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Standing charges are capped for households through the energy price cap, whereas business customers experience hikes to charges despite suppliers providing the same electricity.
According to the FSB, small business owners do not receive an explanation as to why they are paying more through these “stealth charges”.
The trade association gave examples of how small business owners have been impacted by “regressive billing” from energy suppliers.
According to the FSB, an independent auto parts business in Dorset was paying 70p standing charges per day in July 2021.
However, after multiple hikes in the subsequent two years, charges have now risen to £9.69 per day which is 12 times more than the initial asking price.
Another example came from a small tech firm in the Highlands which has seen its standing charges rise from 32p to £7.50 daily, adding £2,500 to the company’s yearly energy bill.
As it stands, a supplier’s “operational costs” contribute to around half of standing charges costs which are relevant to SME business and upkeep.
However, some of this relates to the energy firm’s own operational costs, such as branding and advertising.
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Energy bills have been a major concern for households GETTY Martin McTague, the national chair of the FSB, explained: “Energy suppliers have some explaining to do on the sudden and dramatic hikes in standing charges, which become a regressive form of billing that hamper small business growth, confidence, and investment.
“Even now that the wholesale energy prices have come down from the peak we saw in 2022, small businesses are still scratching their head over skyrocketing bills.
“While parts of the standing charges are being reinvested into green and energy efficiency measures, there’s little to no clarity on the cost make-up, and small businesses are forced to pay the increases with no options and explanations from their energy suppliers.”
To remedy the situation for business customers, the FSB is calling for greater protection from “stealth charges” and urging Ofgem to work with firms to tackle the discrepancy of standing charges between rural and urban communities.
Furthermore, the trade association is pushing for a more transparent standing charges system to ensure greater market competition which would reduce costs for consumers in the long term.
