Energy regulator Ofgem has backed calls by the Federation of Small Businesses to allow small firms to ‘blend and extend’ fixed energy contracts they secured during the market peak last year.
FSB research shows 13% of small firms fixed their energy bills between 1 July and 31 December 2022, during which businesses were quoted £1 per kWh for electricity.
FSB has repeatedly called on energy suppliers to allow these small firms to extend their fixed contracts but at a blended and lower rate – between their original fixed rate and the current, lower wholesale rate.
So far, only a handful of suppliers have adopted the proposal, with little detail on the implementation. Some small businesses say they were excluded from ‘blend and extend’ because their contracts were secured via an energy broker.
“We’re aware of customers who signed during the peak of wholesale price,” Ofgem says in its Non-Domestic Market Review findings.
“We cannot intervene in commercial contracts, but are encouraging suppliers to work constructively and flexibly to provide viable solutions for both parties – for example, via ‘blend and extend’ contract renewal.”
FSB Policy Chair Tina McKenzie said: “Small firms have been waiting for measures that could help alleviate the soaring energy costs and address the heavy-handed approach of energy suppliers. We’ve been working with Ofgem to make sure the voice of small businesses is heard, so we welcome and are pleased to see today’s publication of the non-domestic market review is welcomed.
“We have been calling for a ‘blend and extend’ contract renegotiation for small businesses who fixed their tariffs during market peak last year. We’re glad to see the energy regulator has backed our call and again urge suppliers to step up, act with fairness and adapt.
“While a handful of energy suppliers have adopted our ‘blend and extend’ proposals, small businesses have been complaining to us that they were excluded from the renegotiation because they secured contracts through a third-party broker.
“The obligations from energy giants should not be limited just to their direct customers; they must stop washing their hands of customers whose deals are signed via a broker.
“The issue of small firms being charged disproportionate security deposits is something we constantly hear. Energy suppliers should follow Ofgem’s security deposit best practice guide and stop asking vulnerable small firms for large sums of upfront payments given many are working on little to no cash reserves.
“We’ve repeatedly urged the Government to close a significant regulatory gap by introducing Third Party Intermediaries (TPIs) regulation, eliminating unethical practices in the sector. It’s encouraging to see Ofgem recognise the importance of this, as well as backing our call to expand access to the Energy Ombudsman.
“The energy price crisis illustrates the need for firmer action from Ofgem to protect small business customers through cooling off periods – we strongly believe microbusiness should be given more flexibility to cancel a contract and have access to a 14-day cooling-off period for all switches. This will put them on par with domestic customers and we look forward to engaging Ofgem on this further.”