Energy market reforms heralded as big win for smaller businesses
The Competition and Markets Authority (CMA) has finished its investigation into the UK energy market and has published details of a wide range of reforms aimed at modernising the market for domestic and micro-business customers.
The Federation of Small Businesses (FSB) called the investigation and its conclusions a big win for small businesses up and down the country.
The CMA estimates that from 2007 to 2014, SMEs paid approximately £220 million per year more than they had to in respect to the supply of gas and electricity from the ‘Big 6’ energy suppliers. The report says that, of this sum, it’s estimated that approximately £180 million relates to micro-business customers.
The costs to individual businesses might not be enough to push them into insolvency but excess energy costs can certainly add to the pressures, especially if a small or micro-business is already struggling or operating on extremely tight margins.
More than 30 measures are set to be brought in after what the CMA describes as the most comprehensive investigation into the energy market since it was privatised.
One of the most important moves for business customers is the proposal to make suppliers publish comparable tariffs for micro-businesses – those employing fewer than 10 people – and sole traders using business tariffs. Until now, these businesses have had to go through the process of negotiating deals with multiple suppliers in order to form a comparison. This can be both time-consuming and complex.
The CMA recommendations are also set to remove what the FSB describes as unfair terms and conditions attached to auto-rollover tariffs. These are the tariffs a customer is automatically placed on if they take no action at the end of a fixed term contract.
The CMA found that rollover tariffs cost around a third more (between 29% and 36%) than comparable retention tariffs for electricity and between 25% and 28% more for gas. Retention tariffs are those that customers actively renegotiate with their supplier at the end of an existing fixed term contract.
By Phil Smith