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Micro-businesses overpaying on energy bills by £7bn a year

Small businesses are overpaying on their energy bills to the tune of a collective £7 billion a year, new research claims.

Figures from price-comparison service Energyhelpline suggest that companies which fail to shop around for the most competitive deals on gas and electricity end up paying over £500 a year too much.

But a huge number of small firms have never changed their suppliers. A recent investigation by the Competition and Markets Authority (CMA) into the energy market found that half of the SME customers of Britain’s “Big Six” gas and electricity providers had never switched.

Energyhelpline said that businesses, like consumers, should search for new deals shortly before their current deal is due to expire. But the CMA study found that small firms often faced more serious problems than households.

For example, many business energy contracts make provision for rollover tariffs. This means that customers are automatically shunted onto what are often significantly more expensive deals if they do not renegotiate before a tariff ends.

Meanwhile, deemed tariffs – those that are typically in force on business premises until the new tenant or owner arranges its own energy deal – can be even more expensive than standard rates; in some cases more than double the cost.

Risk of being ripped off

The CMA found that companies – in particular, micro-businesses – that did not take an active interest in the energy deal they were signed up to were at high risk of being ripped off.

Nevena Mulyachka at Energyhelpline said: “Businesses are increasingly suffering due to their passive approach to energy contracts. In a competitive market place, companies cannot afford to spend more on utilities than is necessary. By being proactive and switching, businesses can save on average £532 a year: enough to make a real difference to their bottom line.”

Mulyachka added that with the prospect of colder weather and shorter hours of daylight ahead, small companies should take the opportunity to look for the best deal available – provided they are in a position to switch. “With the winter months just around the corner and energy price rises expected, now is the time to switch onto a more affordable alternative,” said Mulyachka. She added, “With many suppliers offering competitive tariffs for businesses, there will be a tariff suitable for your usage and budget.”

Under the current rules drawn up by industry regulator Ofgem, micro-businesses must be told 60 days before a contract ends how their current tariff compares with the renewal price on offer. The maximum notice period that can be imposed on micro-business customers by gas and electricity providers was cut last year from 90 to 30 days.

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