1.5 million British businesses, representing 96% of the sector, face a greater risk of having their energy supply disconnected than the average household, and of exploitation by unscrupulous energy brokers, according to a new study conducted by Citizens Advice.
This, according to the report, is due to a lack of protections in the microbusiness market – those who employ less than 10 employees and operate within a certain energy usage boundary.
The charity is calling on Ofgem, government and industry to close the protection gap and address the multiple problems faced by microbusinesses in the energy sector.
The report details evidence of microbusinesses being needlessly disconnected, aggressively pursued debts and mis-sold contracts by energy brokers.
If a domestic customer falls behind on their energy bills, their supplier must exhaust all other options before disconnecting them. The same protection doesn’t apply for microbusinesses, so suppliers can be much quicker to cut off supply.
This can be particularly problematic for microbusinesses where a home is attached to a business and using the same energy supply e.g. a flat above a shop.
Between June 2018 and May 2019, the Citizens Advice Consumer Service and Extra Help Unit received 3,480 complaints from microbusinesses about debt-related issues.
Microbusinesses often rely on energy brokers to navigate the non-domestic energy supply market. Common complaints to Citizens Advice about brokers include businesses feeling pressurised into agreeing contracts, limited transparency on broker fees, and brokers misrepresenting how many suppliers they speak to.
According to the watchdog, brokers are not well regulated, allowing unscrupulous operators to exploit micro businesses which are often under-resourced and struggle to find the best deal.
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Microbusinesses also face fewer protections in other instances, such as when an energy supplier fails – whilst domestic customers who have built up credit balances will be recompensed, microbusinesses potentially face losing their credit balance as well as any deposits they may have paid.
Citizens Advice is calling for a number of measures to close the protection gap, including:
- The government should introduce stricter regulation of energy brokers and other third-party intermediaries (TPIs).
- Energy brokers and TPIs should be transparent on commission, market coverage and any fees should appear on bills.
- The industry should improve debt and disconnection processes for microbusinesses.
- The industry regulator Ofgem should protect microbusinesses’ credit balances if their suppliers fail.
Gillian Guy, Chief Executive of Citizens Advice, said: “Microbusinesses should not face the prospect of being cut off or ripped off because of a lack of consumer protections.
“The regulator, industry and government need to do more to support the shopkeepers, sole traders and entrepreneurs who make up a large number of UK businesses and close this protection gap.”
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