Business Energy Supply Billing: Regulation

Pippa Heylings Excerpts

Tuesday 1st July 2025 Westminster Hall

[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.