Business Energy Supply Billing: Regulation
(2 days, 10 hours ago)
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Peter Dowd (in the Chair)
If gentlemen, or anybody else, want to take their jackets off, feel free to do so.
Sarah Edwards (Tamworth) (Lab)
I beg to move,
That this House has considered regulatory powers over billing of energy supply to businesses.
It is a pleasure to see you in the Chair, Mr Dowd. My constituent Samantha Panton opened the Roasters café on the high street more than 35 years ago. Recently, she received a demand from E.ON Next for £10,000, payable within seven days, with threats to disconnect her electricity and close her business, putting 10 jobs at risk. That debt arose because E.ON Next confused her day and night meter readings. Although she had agreed to a £500 weekly payment plan, the company abandoned the arrangement and instead chose to pursue the closure of her business.
Upon thorough investigation, including a review of her accounts dating back to 2017, I discovered that E.ON Next actually owed her £4,433. When I raised concerns about its mishandling of the credit notes and breaches of back-billing regulations, my communications were ignored. Without enforcement or penalties, there is little incentive for companies to change their behaviour. That situation highlights a wider problem: energy companies impose excessive charges on small businesses while routinely engaging in questionable practices under minimal regulation. Small businesses have limited resources when suppliers act unfairly.
Mr Gregory Campbell (East Londonderry) (DUP)
I congratulate the hon. Member on securing this debate. She is raising what sounds like outrageous treatment of a customer and consumer. Does she agree that the Ofgem report was very clear that suppliers should treat domestic and—particularly in this case—non-domestic customers fairly and give them support? It would appear that, in the instance she is outlining and some others that I have had experience of, they are not doing so.
Sarah Edwards
Absolutely. I thank the hon. Member for his intervention, because that is exactly what the report found, yet I will go on to argue that not enough progress has been made to make sure that those business customers are treated fairly.
In response to this issue, I have launched a campaign inviting businesses across the country to share their experiences on my website, aiming to expose these harmful practices. I am confident that straightforward regulatory reforms could reduce energy costs substantially without imposing any cost on the Government. No one likes a bully; I certainly do not, and when I see injustice, I want to fix it. Today, I share not only my constituent’s story, but many others. Colleagues here will have heard similar accounts of energy companies refusing to engage, forcing MPs to intervene or send cases to the ombudsman, often without any resolution.
As a member of the Business and Trade Committee, I have explored this issue through roundtables nationwide. Time and again, we hear that energy costs are the second biggest burden for businesses after staffing, with many driven to bankruptcy by the exploitative practices of energy suppliers. I thank the Committee for supporting today’s debate to shine a light on this problem. This is not just about one café; it is about thousands of businesses that deserve better.
From 2022 to 2024, Ofgem reviewed its non-domestic energy supplier sector. It found that 12% of customers had complained and identified four reform priorities: treat customers fairly; support small businesses; billing on tenancy changes and third-party intermediaries. It updated the supplier licence conditions to enforce fair treatment—but is that working? A freedom of information request shows that only two suppliers have ever been fined for licence breaches; many suppliers do not even report them. In my constituent Sam’s case, E.ON Next breached back-billing rules, but likely never reported it. I ask the Minister when the proposed review of those new licence rules will happen, and whether she can guarantee that it will be rigorous and effective. When will the review of Ofgem itself conclude? There is growing concern that Ofgem is not fit for purpose, acting more like a coach than a regulator. We need an enforcement body with teeth, not one that lets suppliers police themselves.
Returning to Sam’s case, my office referred it to the Energy Ombudsman. We were proved correct; E.ON Next had mishandled her account, and she was awarded £200 in compensation—but really, what does a firm have to do to get a meaningful penalty? Threatening to close a business after making mistakes in meter readings, back billing, failing to issue proper credit notes and threatening legal action are apparently not worth any more than £200.
Compare that with fines for a data breach—up to £17.5 million or 4% of global turnover. That is a real deterrent. Why is it that, when the domestic energy market is regulated far more effectively, a blind eye has been turned to such appalling behaviour in the commercial market? Hon. Members may be interested to know that, until December 2024, the ombudsman could act only for microbusinesses, those with fewer than 10 employees—any bigger, and the business was out of luck. Since December, businesses with up to 50 employees can now be represented; but, again, the fine is only up to £10,000.
I met the Energy Ombudsman to ask how its powers were being used to protect businesses from this wild west of exploitation. Since December, it has dealt with 370 small and medium-sized enterprises in its scope, about half within the terms of reference. Of those cases, most complaints were about suppliers, customer service, billing, sales and back billing. It upheld between 40% and 73% of those complaints.
I have serious concerns, however. The ombudsman has never been out to tender and cannot explain how it decides on the maximum £10,000 fine. It appears to have a lack of resources and expertise to investigate complex commercial contracts effectively. Ofgem expects the ombudsman to do that work, but the extended remit has not come with extended expertise. Instead, the system seems designed for volume and profit, but not for protecting businesses from serious harm.
A Yorkshire packaging manufacturer was scammed by Renewco, which arranged a fraudulent energy deal with Emirati Energy. The business owner paid every invoice on time to his broker, but a year later Pozitive Energy, also known as PE Solutions, demanded tens of thousands in unpaid costs. It turned out that Emirati Energy had signed a fake contract with Pozitive on behalf of the business, pocketing the payments while Pozitive received nothing. Both Pozitive and the manufacturer were victims of fraud.
Who is Pozitive Energy? Its turnover rose by 13% to £1.18 billion in 2024, and its net assets were up nearly 500%. With only 30 employees and £139 million of retained earnings, this is a private company with little transparency. We must therefore assume that it is making around £4.6 million profit per employee. Yet Pozitive went after the small business owner and, despite clear evidence of hundreds of customers billed to one address and mismatched paperwork, it did not investigate until the debts piled up.
When the business owner turned to the Energy Ombudsman, he was told to pay the debt anyway. The ombudsman said it was his problem to chase the fraudster. Why should a small manufacturer pay for Pozitive’s failure to vet its brokers? Ofgem does not regulate third-party intermediaries, instead requiring suppliers such as Pozitive to work only with third-party intermediaries in approved dispute resolution systems, giving customers a route to redress if dissatisfied. Pozitive failed to do that—it failed its licence condition.
That is not an isolated case; the commercial energy market rewards suppliers for ignoring fraud, because it can demand payment from unsuspecting businesses once scams collapse. Meanwhile, the Energy Ombudsman lacks real powers and often fails to protect victims. I have heard multiple stories of these disgraceful tactics destroying livelihoods. One broker firm is tracking more than 1,100 complaints with E.ON Next alone. It is defending 80 of them in court, in what is effectively a group action over dodgy practices on deemed contracts. E.ON sold the debt on when the lawsuits loomed, and 13 cases have already been struck out as unenforceable.
Why is business energy so expensive? When a firm moves into new premises, it is put on a deemed contract until it signs a deal. Legally, those contracts should not carry excessive fees or profits, but in practice suppliers have used them to gouge customers. Some firms were charged £1.60 per kWh during the energy crisis, then locked into multi-year deals with no escape clauses. Even now, some are paying £1 per kWh, when a competitive rate should be around 20p to 25p.
Suppliers know exactly what they are doing. They profit by giving brokers hidden commissions: “You can add 1.5p and keep it, or maybe add 2p and give us back a kickback of 0.25p.” Those kickbacks incentivise brokers to push overpriced deals that hurt customers. One product currently offered by Engie has 5p added to each kWh, which the supplier knows is an incentive for brokers to sell its supply over others. Some brokers only work with two suppliers—hardly a broker business by most people’s definition. Suppliers know; Ofgem knows; but small businesses—left with unaffordable bills, faulty meters and unfair contracts—often do not.
If we want a fair market, we must regulate it properly. That means honest enforcement of billing, fair profiles on deemed meters, transparent broker commissions, and meaningful redress when things go wrong. Until then, small businesses will keep paying the price for a system that is rigged against them.
Suppliers such as npower have taken on small customers and used codes on deemed contract meters to extract higher charges because they knew they could get away with it. They should have chosen not to act for those businesses, but instead they have made huge profits. The Energy Consultants Association estimates that misclassification has generated up to £4.5 billion in excessive, unjustified profits since 2017. Small businesses were locked into unfair contracts from day one, paying inflated rates, with no meaningful correction in sight.
I am calling for urgent reforms to protect businesses and ensure that fairness in energy bills is supported, with stronger regulatory powers for the Energy Ombudsman, including higher fines and a wider remit; outlawing back billing beyond six months for business energy customers and greater protections for small businesses against inaccurate and punitive billing. Energy companies must commit to fair and transparent billing systems. There must be a thorough review of debt collection practices within the sector.
I call for all brokers and third-party intermediaries to be fully regulated, for the adoption of a mandatory code of good practice to raise standards and for all brokers to become members of a dispute resolution mechanism to protect businesses. The Government must empower Ofgem or the Financial Conduct Authority to regulate brokers. That can only be done with regulation—but it must happen fast.
What am I going to do? I do not have those powers, but I have met passionate experts and trade bodies who want change. Together, we will launch a kitemark for responsible brokers, because there are many out there doing good work. It will be fair and transparent. We will publish data on energy rates, so that businesses know what a fair price is when reviewing a contract renewal, and create a directory of brokers who have signed up to a voluntary code of practice, giving power back to businesses.
I welcome the Government’s recent move to lower industrial energy prices for high-usage businesses. However, many smaller businesses—the heart of our communities and high streets—are excluded. Those steps are in the Government’s gift to bring down prices, stop fraud and obscene profits, and protect our small businesses. Added to my asks are simple, cost-free reforms such as capping deemed contract rates to stop bad deals being sold as good ones, and ensuring that SMEs get the correct rates on their market-wide half-hourly meters from day one. This Government must back our businesses and make those reforms now.
Hon. Members will be amused to know that E.ON Next sent me a final bill when I switched office supply. My monthly usage is around £300. The bill it sent me was £18,000—it mixed up the day and night meter readings, and no sense checks were done.
It is time to regulate the sector and to protect and empower businesses, the backbone of our economy. I hope the Minister will have some good news and progress to report on this matter.
Jim Shannon (Strangford) (DUP)
As always, Mr Dowd, it is a pleasure to serve under your chairship. You are maintaining the wearing of a jacket, whereas my hon. Friend the Member for East Londonderry (Mr Campbell) and I have taken advantage of your permission because of the good weather. You have better stamina than me.
I thank the hon. Member for Tamworth (Sarah Edwards) for leading today’s debate and setting the scene incredibly well. If I got an £18,000 bill for normal £300-a-month usage, I would be incredibly worried and anxious, too.
I want to speak on behalf of my constituents and the local businesses in my constituency on which we depend for the success of our local high streets. High streets are under pressure; there are more vacancies in Newtownards high street than ever. The squeezing of profit margins means that many people are considering whether to go ahead with their ideas for a new business, but hopefully what the Government and the Minister are doing will enable entrepreneurs to take advantage of the opportunities. There is no doubt that after the effects of covid, some businesses did not make it. We thank the previous Government for stepping in and responding positively to ensure that those businesses are still here today, but it is crucial that we have proper regulation to stop businesses being burned to the ground financially by crippling energy costs.
In Northern Ireland, the Utility Regulator is the key body responsible for overseeing electricity and gas markets. The Minister knows where responsibility lies. I thank her for her interest in matters relating to Northern Ireland. Her visits to Northern Ireland are an indication of her interest in ensuring that Northern Ireland, which has a different system, is kept under the same rules as those that apply in England, Scotland and Wales; I thank her for all her efforts in that regard. If she lets me know the next time she is over, I will introduce her to some of my constituents in Strangford. They are lovely people— I know that because I am one of them. They are generous and kind; they will not give her a hard time, but they will tell her what they think, in as nice a way as possible.
The UK equivalent of the Utility Regulator is Ofgem, the mainland-wide energy regulator. Energy costs are a reality facing commercial and domestic consumers. We have seen an incredible increase in the last couple of years. Businesses and households are struggling and there is a need for greater regulation to ensure that people are not overcharged beyond belief. The example that the hon. Member for Tamworth gave of a bill for £18,000 was a mistake, of course, but none the less it would shock anyone to their shin bones.
Let me give an example of the problems. There has been an increased use of estimates of energy costs. Energy companies bill businesses based on their rough use of gas and electricity. That results in severe overcharges and a months-long back and forth to get the money back. My goodness—they are quick enough to charge you, but they are not as quick to pay you back when they get it wrong.
I experienced that not long ago when I opened my satellite surgery in Ballynahinch. My constituency of Strangford has grown and has moved further south, and as a result it was imperative to have another advice centre in Ballynahinch to give my constituents the representation that they deserve. We moved premises and were being billed extortionate amounts for gas and electricity, based merely on estimated bills. Thankfully, we were able to get that resolved, but staff and business owners do not always have the time to be on the phone when their energy company is open to resolve such issues. We did get it done. My staff are very efficient and certainly able to respond. What we do for ourselves, we do for others.
Carla Lockhart (Upper Bann) (DUP)
Many businesses in Northern Ireland query their bills and recognise that they have been overcharged. It is dispute resolution access that is the problem: that is why many businesses come to us, as elected representatives, to resolve it. Does my hon. Friend agree that there needs to be better, clearer dispute resolution access? Does he also agree that the regulator in Northern Ireland needs greater power to force suppliers to resolve the issue when it is brought to them in a timely fashion?
Jim Shannon
My hon. Friend is absolutely right. Perhaps the Minister will be able to tell us about the discussions that she has had with the regulator in Northern Ireland. I know she has been in discussions—I am sure of that. Any tightening of the law such as that referred to by my hon. Friend would be a step in the right direction.
Standing charges are also an issue where businesses have been asked to pay a fee regardless of how much electricity is used. The Ulsterman and Ulsterwoman are renowned for their prudence. The hon. Member for Dumfries and Galloway (John Cooper) will confirm that his constituents are similar. We do not want to pay any more than we should. When we get a big bill and we know it is wrong, we question it. My mum and dad brought me up in a certain way. Because we never had much, we looked after what we had. It was a case of “Look after the pennies, and the pounds will look after themselves.”
It is important that we pay only for what we use. The amount that we pay depends on the supplier, on how we pay for our energy and on where we live, which already seems an unfair process. Additional costs are the norm, as many are aware. In the long term, I look to the smaller family-run businesses, like those in Ards in my constituency. Ards is renowned for the family businesses on the high street, on Frances Street and on Regent Street. They have been there for generations, but if they cannot sustain the energy costs they will be forced to close, so we have pressures building on all of our businesses.
There are certainly benefits to greater regulation of energy costs. I reiterate that for smaller businesses the costs of utilities are massive and should be charged correctly. Northern Ireland’s electricity prices are often slightly higher than the United Kingdom average, owing to grid infrastructure and generation mix. We know from our constituents about the pressures on businesses in Strangford, Upper Bann, East Londonderry and across all of Northern Ireland. More must be put in place to make businesses more energy-efficient, to reduce costs and to encourage long-term affordability
I look to the Minister, who is a genuine lady and has a good heart for these issues. I am hopeful for a response to the questions that colleagues and I have asked, and hopeful that in Northern Ireland we can feel the benefits of the good that has been done on the UK mainland. I look to the Minister for a commitment to business stability in future.
Kevin Bonavia (Stevenage) (Lab)
It is a pleasure to serve under your chairship today, Mr Dowd. I congratulate my hon. Friend the Member for Tamworth (Sarah Edwards) on securing today’s debate and on leading such an important campaign that matters not just to her constituents, but to so many of our constituents and the businesses that they run or use around the country. I also want to recognise the hon. Member for Strangford (Jim Shannon), as ever a champion for his residents, for outlining the experiences they are going through. I am sure that there is a consensus on this pertinent issue not just in this room, but across the House.
I would like the Minister to focus on the issue of uncapped energy billing for businesses. As we all know, household energy in the UK is capped by Ofgem. However, this protection is not afforded to businesses suffering under the rising gas and electricity prices that we have heard about. The issue has most impact on small to medium-sized businesses, as they often need to use large amounts of electricity, and the strain of rising cost is subsequently felt by the consumers as businesses are forced to find ways to counteract their costly energy bills. The escalating price of energy for businesses discourages those with an entrepreneurial mindset, as their goals appear unattainable because of the cost of running a business.
I have seen that at first hand in my constituency of Stevenage. Brand-new lunch spots receive high praise from residents, both online and through word of mouth, yet they end up closing after a few short months because of struggles with money. Those struggles are substantially attributable to the rapidly growing cost of running vital café equipment: temperature-controlled food display cases, display refrigerators, fridges and much more. I have spoken to restaurant owners in Stevenage, and the detrimental effects of rising costs are clear. For example, the owners of Pitta Hub, a relatively new lunch spot in the centre of our town, have shared information with me on its other overheads, in addition to its rising energy bills.
According to Utility Bidder, a well-regarded comparison and switching service, the average small restaurant uses between 15,000 kWh and 25,000 kWh of electricity per year. The lowered profit margins for our beloved small businesses affect the growth and prosperity of towns like Stevenage across the country.
I ask the Minister the following questions. Will the Government consider capping energy prices for businesses, as they do for household energy? What are the Government planning to do to support small and medium-sized businesses, such as those in Stevenage that I have mentioned, in the face of rising energy prices? Businesses are crying out because of these rising prices, and we in this House must heed that call. Today’s debate has shown the importance of protecting independently run enterprises. They are the heart of our towns. Ensuring a semblance of stability for their entrepreneurial owners is vital, both to residents and to the economy of towns like Stevenage across our country.
John Cooper (Dumfries and Galloway) (Con)
It is a pleasure to serve under your chairmanship, Mr Dowd. It is customary to congratulate the hon. Member who secured the debate, but I would like to go further: the hon. Member for Tamworth (Sarah Edwards) is an outstanding champion not only for her constituents—through the Select Committee on Business and Trade, on which I also serve—but for the public more widely, with her expert nose for unfairness.
Many businesses and homes in my rural constituency of Dumfries and Galloway are not on the gas grid and, like so many across the UK that are outwith the urban centres, are reliant on such things as tanker-delivered liquefied petroleum gas or kerosene for heating. But almost without exception, everyone is on the electricity grid and so gets a bill for at least this one utility. Given that ubiquity, people might expect the energy market to be the best regulated, and yet, as we have heard this morning, the regime is less the quiet and precise order that one might expect of an old-fashioned provincial bank and more the rough-house of a wild west saloon. Is there an MP in the House who does not have an example of blundering over bills or of sharp practice?
A small business in my constituency struggled with an electricity bill for an astonishing £18,000—that figure again. It was of such magnitude that it would have sunk a much-loved high street fixture and an important employer. Queries—pleas, indeed—went unheeded. I am pleased to say that, following intervention from my team, the bill was waived when it transpired that the issue was a convoluted tale involving a disconnected smart meter and wildly inaccurate estimated bills. There was a happy ending, but that is surely indicative of a wider problem.
Energy firms are increasingly a law unto themselves and are judge, jury and executioner over bills, billing and the recovery of debts, both real and imagined. Too often, they hide behind automated “computer says no” responses and infuriating call centres whose hold muzak should be the Cuckoo waltz: you hang on for an eternity, despite your call apparently being “very important” to them, although of course they are experiencing a “very high volume of calls” 24/7, 365.
I am a huge fan of the free market. I think it delivers competition, which gives consumers choice, which in turn drives down bills. However, it falls to us in this place to regulate that market: not to put the dead hand of Government on the tiller, to proscribe the private sector or fence it in, but to create an environment that is fair to both sides—industry and public—and is delineated, transparent and responsive.
And so the spotlight shifts from the energy firms to the regulator. Ofgem seems to be the victim of an overly wide remit: it has to deal with networks plus retail, and has ended up being criticised by the industry and consumers alike. It is difficult not to agree that it has lost its way when, as my hon. Friend the Member for Bromsgrove (Bradley Thomas) raised at the Energy Security and Net Zero Committee, it spent taxpayers’ cash on irrelevances such as courses called “Pride in intersectionality” and “Perspectives from Rainbow Regulators”.
Regulators rest on three pillars: deterrence, detection and enforcement. The first two are intertwined, because if there is no prospect of getting caught, there is no deterrent. Many regulators fail on the third pillar: they talk a good game and threaten all sorts of dire retribution, yet they deliver little enforcement. Ofgem writing to suppliers demanding to know why they have not ended sharp practice such as back billing does not look like a regulatory crackdown; it looks like regulatory breakdown. The Government have been consulting on Ofgem, and the conclusion must surely be that the regulator is having a shocker when it comes to billing.
I hope that the Minister can assure us today that the Government are getting wired right into the fuse box of this vital, but apparently overwhelmed, regulator. Of deterrence, detection and enforcement, the greatest is enforcement. When will the Government apply a bit of that to the regulator itself, so that my constituents can have some faith that the bills piling up on their doormats, and increasingly in their inboxes, are at least accurate?
Pippa Heylings (South Cambridgeshire) (LD)
It is a pleasure to serve under your chairship, Mr Dowd. I join other Members in congratulating the hon. Member for Tamworth (Sarah Edwards) on securing the debate and on her fantastic laying out of the situation. Small businesses are the backbone of our economy: they are 99% of UK businesses and over 5.5 million strong. My constituency has one of the highest concentrations of SMEs in the country. They really matter. They are essential to our communities and our growth.
Almost 45% of nearly 1,300 businesses surveyed by the Federation of Small Businesses at the end of 2024 reported increased costs due to a rise in utility costs. Our small businesses are really struggling and they are being failed by an energy system that lacks due fairness, transparency and accountability. SMEs have been left behind. When the energy bill relief scheme was replaced, support was slashed by 85%, and then it was removed altogether by March 2024. Liberal Democrat analysis estimates that 3.1 million SMEs saw bills rise by £7.6 billion. Today, the average small business electricity bill stands at £240 a month and 92% of SMEs plan to raise their prices due to energy volatility. That is unsustainable.
Domestic customers are protected to some extent by the energy price cap, and larger energy-intensive firms benefit from the brand-new British industrial competitiveness scheme. Is the Minister considering bringing in caps on energy costs for small businesses? In the meantime, owners of SMEs are encouraged to do it alone—independently explore the market and switch to a better deal. Yet we know, and we have heard today, that many small businesses do not have the capacity to undertake the work necessary to find the best energy deal and are vulnerable to exploitation, increasing, rather than decreasing, overall costs. That is where regulation of the energy market for small businesses is so important.
This debate is timely, but this is not a new issue. A 2023 report by Octopus revealed a disturbing picture of the impact on small businesses of a lack of regulation, unscrupulous practices and unfairness in the energy market. Some 3.2 million had had a negative experience with energy brokers and 78% of small businesses demanded that broker commissions be made clearer.
That same year, thousands of small businesses—manufacturers, high street stores, pubs, community organisations, faith groups and charities—joined a £2 billion class action lawsuit to seek compensation for having overpaid for tariffs with energy giants brokered by third-party brokers. That showed that undisclosed broker commissions were being added to the unit cost of gas and electricity, falsely inflating energy prices for up to 2 million businesses and organisations in the UK.
Ofgem’s own data showed that around 37% of non-domestic energy consumers had contracted such third-party intermediaries, and there was evidence of unscrupulous practice by some of those TPIs. We therefore welcomed Ofgem’s December 2024 move to allow microbusinesses with up to 50 employees to access the Energy Ombudsman for alternative dispute resolution, but that left small businesses over the threshold locked out of that recourse to redress and recompense. Ofgem later expanded that offer to small businesses and required the energy giants to be transparent about commissions they were paying to brokers and where they were adding the cost on to consumers’ bills.
However, Ofgem still does not have direct regulatory powers over third-party intermediaries. A consultation on regulation closed nine months ago, so will the Minister set out what the Government will do to introduce a mandatory authorisation regime with standards, registration and enforcement, and when? Businesses deserve transparency and protection. It was encouraging to hear of the kitemarking system that the hon. Member for Tamworth is championing, together with businesses. That shows that there are third-party brokers that are doing this well and want to help businesses, and we need to celebrate that where it is happening.
There are also systemic problems that need to be addressed. They include overcharging, about which we have heard distressing stories from all hon. Members. In May, Ofgem confirmed that 10 suppliers paid out more than £7 million in compensation for overcharging errors. That alone should be cause for alarm. Ofgem data shows that 23% of claims from non-domestic consumers were about billing, and nearly half of all complaints were unresolved. They include incorrect meter readings, inflated charges and poor customer service. Ofgem has now extended its standards of conduct to all business customers, not just microbusinesses. That is welcome, but guidance is not enough, as has been said. We need enforcement and a cultural shift among suppliers. They treat businesses as easy revenue sources, not valued customers.
The Department for Energy Security and Net Zero is currently reviewing Ofgem’s powers, remit and effectiveness, and rightly so. The Department has a big hill to climb, because trust in the energy sector is really low. The non-domestic market in particular has long been the wild west of energy regulation. Ofgem must be equipped not only to set standards but to enforce them, to act swiftly against abuses and to be accountable for the outcome it delivers. I therefore ask the Minister again to tell us about the response to the review. Businesses deserve more than warm words; they need action.
Nick Timothy (West Suffolk) (Con)
I am pleased to respond to the debate on behalf of the Opposition. I congratulate the hon. Member for Tamworth (Sarah Edwards) on securing it. She gave a serious and passionate speech about the injustices experienced by too many businesses, and I commend her campaign and encourage all small businesses to visit her website so that they can tell their stories and give their evidence.
Every Member’s speech confirmed what a significant problem this is. The hon. Member for Strangford (Jim Shannon) reminded us of the effects on our high streets. With his usual journalistic flair for arresting language, my hon. Friend the Member for Dumfries and Galloway (John Cooper) questioned Ofgem’s wide remit, which ranges from regulating careless errors, such as mix-ups between night and day meter readings leading to intimidating demands for bills as high as £18,000, to systemic failures and cynical malpractice. We need the Government to act.
Even apparently innocent mistakes come with a terrible burden for small businesses. We all know the pain and stress of the bureaucracy we have to handle when there is a problem, and sometimes that bureaucracy feels like a deliberate hurdle that has been constructed by the businesses in question. Small firms have to contend not just with high costs, but with lost time, which is a highly precious commodity for them.
We must also consider the systemic problems. The hon. Member for Tamworth mentioned kickbacks for brokers who push more expensive contracts, and she rightly asked about the powers available to deal with errant companies. I thought her comparison with fines for breaches of data laws was apposite. Will the Minister tell us when we can expect the review of Ofgem to conclude? Can we expect increases in the fines levied against companies when they fall short?
As the hon. Member for Stevenage (Kevin Bonavia) suggested, high energy costs themselves are a huge problem. It is not just about the conduct of businesses; we must explore the effects of wider Government policy, too, because no country in history has ever made itself richer by making energy more expensive. First fossil fuels and then nuclear powered the industrial and technological revolutions of the 19th and 20th centuries, and yet it is the policy of our Government to increase the price of energy and make its supply less reliable. They are defying common sense by pushing up demand for electricity with their ideological targets for decarbonising the grid and rolling out heat pumps and electric vehicles. Large-scale electrification is pushing the grid to its limits; it is already struggling to supply new homes, factories and data centres. We can clearly see the effect on energy bills for businesses.
The Climate Change Committee—an unelected and unaccountable quango against which Ministers offer little or no resistance—says the cost of electrification must be shifted on to bills for gas and oil. For years the climate lobby insisted that renewables were cheaper than gas, but now that they have to put their money where their mouth is, they want to put the public’s money where their mouth is—now that the world can see the truth, they want to transfer the massive cost of renewables on to gas bills.
The renewables obligation, feed-in tariffs and the capacity market are all direct costs to business. Environmental levies are already projected by the Office for Budget Responsibility to increase from £9.9 billion last year to £14.8 billion by 2030. Those hidden costs support the complex web of public subsidies that prop up wind and solar. Wind and solar generators are given billions of pounds in subsidies paid through green levies. Without those subsidies, most of them would not be commercially viable. The levies are not the only costs created by a dependence on unreliable renewables; customers also bear the balancing costs that are paid to generators to switch their power on and off. As wind and solar expand, those costs will triple to £8 billion by 2030.
Grid decarbonisation will create a carbon price of £147 per tonne of CO2, which is 2.7 times higher than the current level. Ever-rising carbon prices will be locked in under the EU reset deal, which will keep us aligned with the EU emissions trading system. We already have the highest industrial energy prices in Europe. Our energy consumption fell last year by 0.1%—we were the only G7 country where that happened, apart from Japan and Germany. Despite global energy demand getting ever higher, our energy supply fell by an average of 2.1% per year between 2014 and 2024. Output from energy-intensive industries has fallen to its lowest level since the 1990s.
Decarbonisation is undoubtedly fuelling deindustrialisation. Just last week, it was announced that a facility in Teesside, one of the largest chemical plants in the country, will be permanently closed. The Grangemouth oil refinery stopped processing crude oil last April. British Steel has been brought to its knees. Yesterday, we heard the sad news about the Prax Lindsey oil refinery.
The Energy Secretary wants to blame international gas prices for our insane energy prices, when he has been throwing policy costs on to British industry to subsidise expensive and unreliable renewables. Now he says he will subsidise heavy industry to counter the cost of the renewable subsidies he is making it pay. There are countries, such as the United States, that rely much more on fossil fuels and have lower energy costs than we do. Labour is trying to con the public by blaming global prices, when it is the one that is piling on policy costs.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Miatta Fahnbulleh)
I thank my hon. Friend the Member for Tamworth (Sarah Edwards) for introducing this important debate, and all hon. Members for their insightful contributions. I assure them all that the Government are taking this issue seriously, and we are working at pace to respond to it.
The experience of Roasters reflects the issues that consumers face in an energy market that, quite frankly, is not working for them. Let me be clear that reforming the energy market so that it works for consumers and is fair is a key priority for this Government. We have made progress already, which I will set out, but we must do more.
I was extremely disappointed to learn of another example of a customer receiving incorrect bills and back-billing requests. Ofgem supply licence conditions are very clear: suppliers must take all reasonable steps to reflect accurate meter readings in bills or statements where these have been provided by a customer or taken by a supplier. Suppliers must also take all reasonable steps to obtain meter readings at least twice annually. They must provide historical consumption information to all customers upon request and explain how a customer’s bill was worked out.
Sarah Edwards
I thank the Minister for giving us lots of information on challenges and things that companies should be doing. Roasters café had four different smart meters fitted, none of which worked. When my constituent raised the alarm 12 months in and said she did not feel that the final meter was working, she was told, “It’s absolutely fine—it works. There’s no problem.” As we know, there was a problem; it was not making the readings, and it was certainly not smart. Can the Minister speak about the fact that energy companies are imposing these meters, charging for the privilege of going to check them and then claiming that they still work?
Miatta Fahnbulleh
We know we have a challenge with smart meters. The majority of smart meters work, but there are far too many cases where they do not. We are working with the DCC and suppliers to make sure that we have connection across the piece and that there is a clear obligation on suppliers to respond to meters that are not working. Ofgem is reviewing this at the moment, and we will set out what we will do to introduce further obligations and ensure compliance on the specific issue of smart meters.
On the wider question about back billing, let me be clear: suppliers cannot back-bill domestic or microbusiness consumers for energy use more than 12 months ago. A company is classed as a microbusiness when it has fewer than 10 employees and turnover of less than £2 million, or where it falls under certain energy-usage thresholds. In February, the Secretary of State wrote to the chief executive officer of Ofgem, asking him to accelerate the regulator’s work on reviewing the back-billing rules as part of its ongoing consumer confidence reforms. Ofgem is in the process of doing that.
The Secretary of State and I have constant meetings with the regulator to make sure that this matter is proceeding with the pace and urgency it requires. It is very clear that suppliers can back-bill consumers only in very specific circumstances; we need to clarify what those circumstances are and ensure far tighter compliance and enforcement on this issue.
My hon. Friend raised a point about the Energy Ombudsman, and what it should do to support businesses such as those in her constituency. We announced an expansion of the ombudsman’s service in December so that small and medium-sized enterprises with fewer than 50 employees can now access it. That means that 99% of businesses in this country can now access that important service. In recognition of the impact on businesses when things go wrong, the maximum award for new business disputes that go through the ombudsman has been doubled to £20,000.
We know that much more must be done to ensure that the ombudsman and the redress service are working for all customers. We have committed to consulting on a range of issues that would strengthen the ombudsman, including introducing automatic referrals to it rather than consumers having to do that themselves. We think that will speed up the process.
We are also looking to reduce the referral waiting time from eight weeks to four weeks so that customers are not waiting in a long and frustrating process before their issue gets redress. Critically, as part of that, we are looking to increase the value of the compensation that is paid to customers when things go wrong and the ombudsman has clearly put in place a judgment that suppliers are not responding to. We also want to make compensation automatic, because that is how we can expand and drive deterrence in the system.
We will look to see how, in instances of, for example, excessively long call waiting times, which consumers find desperately frustrating, unacceptably high bills when suppliers fail to adjust their direct debits, and suppliers not responding to complaints in time or not complying with the Energy Ombudsman, there can be automatic compensation so that consumers get the redress without having to go through the hassle.
Sarah Edwards
I thank the Minister for all the additional details and information on where we are hoping to get to. One thing I learned about was the problem of deemed contracts. When a business moves into a premises, they are put on an assumptive contract, but that has caused lots of problems. The ombudsman and Ofgem have decided that they cannot make any rulings on deemed contracts and when a deemed contract becomes an actual contract, and the issues around the money that is then made. Does the Minister have anything to say about deemed contracts, which contribute to a lot of complaints?
Miatta Fahnbulleh
We will raise the issue of deemed contracts with the regulator and the ombudsman. More broadly, my hon. Friend has raised specific concerns about the ombudsman’s approach. There is a clear complaints procedure, so if constituents feel that they have not had the service that they require, there is a process to escalate their complaint up the hierarchy of the ombudsman and consumers should use it.
My hon. Friend also raised the important issue of the Ofgem review, as did other Members. I could not agree more; we need a regulator with teeth that is on the side of consumers. As part of our manifesto, we promised to strengthen Ofgem, to ensure that it can hold companies to account for wrongdoing and require higher standards of performance, and to make sure that customers receive automatic customer compensation for poor service. To address that, in December, we launched a comprehensive review of Ofgem. We are in the weeds of that review, which will conclude in the autumn. Critically for me, the review will establish Ofgem as a strong consumer regulator. It will ensure that Ofgem is equipped to address unacceptable instances of customer failing and, importantly, we want it to reset consumers’ confidence in a system that, quite frankly, they have lost confidence in.
In response to the hon. Member for Dumfries and Galloway (John Cooper), the review will specifically look at whether Ofgem has the right remit, mandate, tools and powers to do the job that consumers expect. We want to ensure that all the examples are represented, so we have done a big call for evidence. We are doing huge amounts of engagement to make sure that all the evidence informs the final conclusions of the review. Critically, it will also look at redress, because we know that we need to get that right. The point has been made over and over again that it is about setting in place the right regulatory framework, but also about making sure that there are repercussions when compliance does not happen, and that there are clear enforcement mechanisms. We want to ensure that the regulator has all that.
We know that the cost of energy is a massive issue for businesses across the country, particularly small businesses. This issue, and the question of whether we cap energy bills for non-domestic customers, was raised by my hon. Friend the Member for Stevenage (Kevin Bonavia) and the hon. Member for South Cambridgeshire (Pippa Heylings). We have taken the judgment that the way that we respond to energy bills that are too high is to sprint in order to deliver clean power and break our dependence on fossil fuel markets so that we can drive down costs and bills for consumers. The shadow Minister is wrong: this is not and never was ideological. We have seen the worst energy crisis in a generation and our dependence on fossil fuels was at the root of that. That crisis, not on our shores, meant that businesses and consumers across the country were paying the price. That is why diversifying our energy mix, whether Members believe in net zero or not, and generating home-grown clean energy that we control are the routes out of this bind and out of volatility. That will deliver energy security for families and fundamentally secure family and business finances.
Nick Timothy
The Minister, as Ministers do, made a point about the volatility of gas prices. When wholesale gas prices fell and the price cap was lowered, the Labour party put out posters saying, “Labour have just cut your energy bills.” Will she accept that it was wrong for the Labour party to do that, when that fall was because of the reduction in wholesale prices and nothing to do with policy costs, which were actually increasing?
Miatta Fahnbulleh
My words were very clear. We welcome the reductions in energy prices, but we were very clear that we are on a rollercoaster: prices go up and prices go down. We must get off the rollercoaster so that we deliver energy security. That will deliver price stability and fundamentally secure family finances.
Miatta Fahnbulleh
I will make some progress.
I want to end by addressing the issue of energy brokers, which has been raised. We know that many energy brokers can help businesses to save money on their bills with contracts tailored to their needs. However, we have also seen evidence of opaque charging structures and unfair sales practices. We are hugely conscious of that, and last year the Government launched a consultation on introducing regulation of third party intermediaries such as energy brokers, aimed at enhancing consumer protection, particularly for non-domestic consumers, where we have recognised that there is an issue that must be addressed. The consultation has now closed, and I can assure my hon. Friend the Member for Tamworth that the Government are working through the huge volume of responses that we received and will respond in due course.
Finally, to the hon. Members—
Jim Shannon
Forgive me for pushing on this matter, but I did ask about the Utility Regulator in Northern Ireland.
Miatta Fahnbulleh
That was my concluding point, to hon. Members from Northern Ireland, who have raised a really important issue: we are working closely with the Northern Ireland Government to ensure that the improvements we make in the UK market are aligned and that lessons are learnt to ensure that, where we develop stronger and better practice, it is shared with the regulator and the Northern Irish Government. In the end, we must ensure that we have a system that works for all consumers across these isles.
Let me conclude by again saying a huge thank you to my hon. Friend the Member for Tamworth for raising this important issue, and by offering, if she wishes, to meet to talk in more detail about some of the issues she has raised. I am clear that, without a fair, functioning energy market, our clean power mission will not succeed, energy bills will not come down and consumers will not get justice or access to a system that works for them. That is an absolute imperative for us; that is the priority; that is the thing that drives everything we do. We look forward to working with all hon. Members to achieve that outcome.
Sarah Edwards
I am so pleased to have had the support of hon. Members; I remark on the stories that highlight some of the regulatory differences across the Irish sea.
Caps for business energy, or some kind of cap on deemed contracts, could help to bring prices down without costing the Government and would help to get the market into some kind of equilibrium. The attempt to enforce estimated bills is causing absolute havoc. Enforcement must be a priority for the Government, so I welcome what the Minister said about its being front and centre of the reviews and particularly the recognition that more must be done. We must ensure that there are incentives for energy suppliers to businesses to behave appropriately and stop their malpractice.
It is so disappointing that no action has been taken yet to tackle the sector, with no punishment for that poor practice or for the dodgy brokers who are making businesses pay. Those costs get passed on to consumers, and they have made our businesses uncompetitive. It is an abuse of a lax system that is failing every day to protect our valued businesses, so I again call on businesses to fill in my survey and share their stories, and say to them: “Don’t answer unsolicited phone calls; question whether the deal is really a good deal, and help me to call on our Government to continue with the commitments they have made to supporting our SMEs.”
This is no time for half-measures and empty promises. Small businesses, the backbone of our communities, deserve protection, fairness and transparency in their energy dealings. The Government have known about this issue since 2013, so I call on this Government to urgently strengthen the powers of the Energy Ombudsman and outlaw back billing beyond six months. I highlight the abuse of deemed energy rates and half-hourly settlement meters, which are causing all kinds of issues for SMEs, which cannot get the appropriate rate even when they have switched to smart meters. Brokers and third party intermediaries must be fully regulated and held to a strict code of conduct. Many people are calling for fraudsters and excessive bad brokers to be driven out of the sector.
We need more dispute resolution schemes, particularly for brokers. I also urge immediate empowerment to regulate the sector effectively, whether through Ofgem or the Financial Conduct Authority. I call on energy companies to commit to fair and transparent billing and responsible practices. While the industry waits for stronger regulation, I am committed to working with experts, trade bodies and businesses to launch a trusted kitemark, and to publishing fair energy data.
Good brokers typically make between 1p and 1.5p per kWh. We need to create a directory of those reputable brokers that give power back to businesses. Let us act now, before more businesses suffer, before more fraud occurs and before more jobs are lost. One example of excessive profits can be read in law. Expert Tooling had its broker take a 35% profit margin. It paid £125,000 for energy, but the law said that was okay. That is not okay; the future of our high streets, towns and communities depends on decisive action today.
Question put and agreed to.
Resolved,
That this House has considered regulatory powers over billing of energy supply to businesses.