Rises In Electricity Bills For SMEs

[27 January 2009]

Small businesses in Scotland are experiencing 40+% rises in electricity bills as their new contracts take effect this month as  a result of suppliers seeking to make up losses on expensive long-term supply agreements.

Scottish Gas may have pledged to cut prices by 10% next month but a study by energy pricing site Makeitcheaper.com showed that SMEs were being severely squeezed by electricity suppliers.

With business energy rates negotiated on a case-per-case basis, the treatment meted out to small businesses contrasts sharply with that accorded to larger industrial users who use their financial muscle to get reductions in their energy charges.

The big energy companies say that their small business consumers have the freedom to change suppliers if they can get better terms elsewhere but new contracts will often begin automatically unless companies explicitly withdraw from them as owners often fail to meet deadlines to give notice through being confused by the small print of contracts that can run to several pages in length. They may also be tied in to longer-term deals because they have weaker bargaining power.

According to Makeitcheaper.com, 90% of all businesses stick with their original supplier even though they could get reasonable discounts by switching as it is possible that a new supplier may be prepared to take a loss to gain the new business.

Industry regulator Ofgem have this month pressed the big six energy suppliers to simplify contracts to ensure that business owners are aware of their options, and are working on producing proposals to include a new code-of-practice to highlight required periods of notice and to ensure that tariff information is presented in a simpler format.

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