Small firms angry over price hikes for energy firms’ standing charges

The Federation of Small Businesses says energy companies have some explaining to do over increases in standing charges levied on SMEs in the wake of rises as large as 12-fold increases.

FSB National Chair Martin McTague says the sudden and dramatic hikes in standing charges have become a regressive form of billing hampering small business growth, confidence, and investment.

He said: “Even now that the wholesale energy prices have come down from the peak we saw in 2022, small businesses are still scratching their head over skyrocketing bills.

“While parts of the standing charges are being reinvested into green and energy efficiency measures, there’s little to no clarity on the cost make-up, and small businesses are forced to pay the increases with no options and explanations from their energy suppliers.

“Small firms do not have the same protection as household customers when it comes to energy price hikes. Business energy bills could continue to stay high if the standing charges system remains the way it is now.

“A more transparent standing charges system is needed to ensure market competition and, most importantly, to enable small business customers to understand clearly what they are paying for.”

He cited an independent auto parts business which had seen its daily standing charge rise from 70p a day in July 2021 to £9.69 today.

The FSB is therefore calling for:

• Greater transparency on suppliers’ calculations of standing charges, including disclosing any Third-Party Intermediary commission included

• Exclusion of SOLR acquisition costs that will only directly benefit the profits of larger energy suppliers

• Ofgem and energy suppliers work together to narrow the discrepancy of standing charges between rural and urban areas

Mr McTague said the FSB’s latest Small Business Index shows utilities were once again the most commonly-cited cause of rising cost pressures, chosen by over three in five small firms (62.5%), a position they have held since Q1 2022.