Calls for small business standing charge freeze

Small firms should have their energy standing charges frozen this winter and have access to a 14-day contract cooling off period, a trade body has urged.

The Federation of Small Businesses (FSB) has released its latest Small Business Index which shows that utilities are a cost driver for a majority of small firms, with more than 57% citing utilities as the main cause for rising business costs in Q3 this year, down slightly from 62% the previous quarter.

The body said standing charges “continue to be an issue”, with reports of one small garden centre paying £1.20 in daily charges.

As such it is calling on Ofgem to implement a freeze in standing charges over the winter period.

The FSB is also calling for the regulator to give microbusinesses more flexibility to cancel a contract through access to a 14-day cooling off period, putting them on par with domestic customers.

In an Ofgem consultation published in July, the issue of cooling off periods for microbusiness customers was discussed.

It said: “For domestic energy customers there is a 14 day cooling off period…in the Micro Business Strategic Review this was raised as a potential option. However, this was not progressed due to work happening at the time on the faster switching period. We noted in that document that we may review the idea of a cooling off period in the future, once faster switching went live, which it now has.”

Ofgem added that two customer representative groups requested that it looks into the matter again as it is something they wish to see implemented, to protect microbusiness consumers.

“We will engage with stakeholders in order to determine when the appropriate time to review this may be, given our other proposals,” it said.

FSB national chair Martin McTague said: “While the fall in October’s energy price cap contributed to the slowdown in inflation, it’s important to point out that business tariffs are not protected by the cap, and many small firms are still living with higher utility bills, putting them under continuing stress.

“Giving microbusinesses the flexibility to cancel a contract through a 14-day cooling off period would deter pressurised sales tactics and help avoid some of the difficulties we saw last year when small firms found themselves trapped on high fixed tariffs.

“Freezing standing charges is another way to help cut energy bills. This is a fee small firms have to pay regardless of their energy usage and has been used by energy suppliers as a back-door way to inflate prices. We therefore welcome Ofgem’s consultation on potentially changing the standing charges system.”

“Small businesses are looking at Ofgem for a vital protection this winter. We look forward to continuing engaging the regulator on this further,” he added.

An Ofgem spokesperson said: “We are committed to supporting an energy market where business customers receive excellent service, pay fair prices, and can rely on stable suppliers. That is why we opened up a consultation earlier this year on how we can better support business customers in paying their energy bills.

“We will very soon be consulting on licence changes to address the main concerns that businesses, their representative bodies and other stakeholders raised and we have also recently started consulting on how energy standing charges should be spread across the system.”