Small businesses are facing a growing burden of hugely inflated standing charges on their standard energy bills, with some now up to 13 times higher than they were just three years ago.
The Federation of Small Businesses (FSB) has lodged a complaint with Ofgem, the energy regulator, pleading for action against the rapidly increasing standing charges that affect smaller companies, especially those located in rural areas. An example came from one business owner who saw his daily standing charge rise steeply from 70.94p in July 2021 to 969.64p by September 2023. That's more than 13 times the initial amount.
These standing charges aren't dependent on the amount of energy being used. Instead, they help cover the cost of supplying energy to both homes and businesses all across the UK. They also help take care of the expense involved in building new network infrastructure and ensuring that power continues uninterrupted when energy suppliers fall into bankruptcy.
However, while householders have the protection of an energy price cap, such protection doesn't extend to small businesses. Tina McKenzie, chairwoman of the FSB policy team, said: "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."
"Small business energy customers behave in a way more akin to consumers than big businesses, lacking the resources, the expertise and the buying power necessary to get the best possible deal out of their energy suppliers. However, they do not benefit from anything like the same level of protection as that rightly available to households, leaving them caught between two stools."
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"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."
Ofgem asked for opinions on standing charges last year, resulting in over 20,000 responses. The regulator said it wanted to start a dialogue about how these charges operate and was open to suggestions for modifying the system.
Standing charges are often more expensive in rural areas because the cost per household to the energy provider is higher. According to the FSB, this means these charges disproportionately affect businesses in rural parts of the country.
It's making the gap between rural and urban areas wider and "[undermines] efforts to level up more remote parts of the UK", the group stated. An Ofgem spokesperson declared: "We're assessing the standing charge system overall, including tackling issues faced by non-domestic consumers."
"We're grateful for FSB for responding to our consultation and we're looking at its ideas. We agree too many businesses get unexplained price hikes from suppliers or are ripped off by brokers that's why we're putting tough new rules in place from July to resolve disputes and get greater clarity on fees."
"We published a detailed non-domestic market review last year and are working with ministers, industry and businesses on the additional price protection and bill transparency they're calling for."
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