Energy News

Small businesses warned over crippling energy bills

Wednesday 13 April, 2011

By Martin Fagan - news@consumerchoices.co.uk

Supplier mistakes and under-charging mean small businesses could now face demands for up to six years’ “back-billing”, says energy watchdog

Thousands of small businesses could be hit by crippling energy bills after being undercharged by their supplier for years at a time, warns Consumer Focus.

Last year, the statutory watchdog for energy consumers received 1,848 complaints from micro-businesses (defined as having fewer than 10 employees and an annual turnover of less than £2 million) who had received unexpected bills after their energy charges were underestimated by their supplier.

Despite back-dated charges are often the result of mistakes by the supplier, energy companies can ‘back-bill' businesses for up to six-years of usage, compared to just one year for domestic customers, and can demand instant repayment.

“Small businesses are not deliberately avoiding paying their bills,” said Audrey Gallacher, head of energy at Consumer Focus.

“Receiving a bill for thousands of pounds out of the blue is a nightmare scenario for any small business, especially in these difficult times. With suppliers able to go back six years, supplier mistakes can add up to big debts that could potentially cripple some firms.”

Energy costs are a significant overhead for many small businesses, and nearly a fifth (19%) say that they account for 5-10% of their overheads, according to separate research by comparison and switching service, uSwitch.com.

For over 1 in 10 small businesses, energy accounts for more than 10% of total overheads, with spending on average nearly £9,000 a year on their energy bills and one in five (20%) spending over £10,000.

David Caro, environment and energy policy chairman at the Federation of Small Businesses said: “Small businesses have suffered unfair and non-transparent contract terms from uncaring energy suppliers for a long time.

“Although a micro-business' consumption is very similar to that of a customer in the domestic market, they are not covered by the same protections and safeguards, which make small businesses even more vulnerable.

“A large unexpected energy bill, particularly in these difficult trading times, can be as serious as the last nail in the coffin for a small firm, which is then forced out of business through no fault of its own.”