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11 September 2018

Small businesses call for a smarter, cheaper and fairer energy market

Introducing ‘Open Banking’ style measures to the energy market would make it easier for small businesses to switch providers and access cheaper tariffs, according to new proposals by the Federation of Small Businesses (FSB).

Open Energy: Using data to create a smarter, cheaper and fairer energy market, commissioned by FSB and produced by Fingleton Associates, highlights how data can be used by customers – and those that represent them – to help make better and more informed decisions about their energy service.

The report demonstrates how energy data can be shared and used – in a secure and safe way – to empower customers and underpin the smart and sustainable energy market of the future.

The Open Energy concept would bring a number of critical reforms to the market, including:

  1. Standardising tariffs and other relevant market information in machine-readable formats to allow automated comparisons of energy tariff offerings.
  1. Making smart meter data available through a secure standardised Application Programming Interface (API) to approved third parties.
  1. Allowing energy customers to delegate contract switching powers to third party intermediaries.

These reforms would increase switching rates and create opportunities for innovative uses of data, including for demand-management purposes that could increase the proportion of the total energy mix from renewables.

Commenting on the report, FSB National Chairman, Mike Cherry, said: “Small businesses are often the worst hit by an energy market that simply doesn’t work for them. Too often we hear stories of smaller firms being overcharged or being stuck on the most expensive tariffs.

“This is why we need an open and transparent energy market that allows smaller businesses to take control of their data and use it – via an intermediary if they choose – to find the best energy deal, switch providers, take advantage of smart technology, manage when and how they use their energy, and even how it is generated.

“Open Energy, like Open Banking, has the potential to transform the market – if implemented correctly. It would help small businesses to be more energy efficient and empower them to make energy choices that are cleaner, greener and more sustainable.

“Smaller firms are already playing a critical role in helping the UK become more energy efficient and reducing our reliance on dirty energy. If adopted, these reforms would make it easier for more small businesses to play their part.”

Fingleton Associates CEO, John Fingleton, said: "It is very clear that households and small businesses buying energy in the UK find the market somewhat confusing and are not always able to switch with confidence. It is also clear that switching can bring huge benefits in terms of lower price and better service, and longer term in forcing suppliers to be every more efficient and responsive to consumers, and in rewarding innovative new entrants.

“Open energy would help address this fundamental problem that underlies competition concerns in the energy sector. It would enable customers to switch optimally with minimal effort, lowering their bills and increasing productivity in the sector.

"More generally, opening data across the economy, and giving individuals control over the data they produce and allowing innovators to combine data from areas like banking, energy and beyond to create powerful tools for simplifying our lives. This could lead to a great unbundling of services away from complex offerings that suit incumbents at the expense of customers, towards models that are simple and easy to understand. We are already opening banking up to this sort of approach, and energy is the next step – but the more we open up, the more powerful the combinations may be."