The Federation of Small Businesses (FSB) has called for the energy regulator Ofgem to take action on the standing charges paid by small businesses, many of whom have seen the daily fixed price they pay, regardless of usage levels, soar over recent months.
FSB has written to Ofgem's chief executive Jonathan Brearley to draw his attention to the issue, and to recognise the "specific, negative impact standing charges are having on small firms", the letter says.
FSB's correspondence follows on from a letter to Ofgem regarding standing charges from the Energy Secretary, Claire Coutinho MP, and the Minister for Affordability and Skills, Amanda Solloway MP, sent at the end of March, which highlighted that the Ministers wish to "ensure that bills are fair and affordable for all consumers".
One small firm whose owner got in touch with FSB reported an increase in the business's daily standing charge from 70.94p per day in July 2021 to 969.64p per day in September 2023 – over 13 times higher.
Small businesses based in rural areas have been disproportionately affected by standing charge increases, which exacerbates the existing rural-urban divide and "[undermines] efforts to level up more remote parts of the UK", FSB's letter says.
Standing charges are used to fund network infrastructure, operating costs, and policy costs for schemes such as the Warm Home Discount, but this can be difficult for small firms to comprehend. Business customers are not covered by the energy price cap for consumers and many small firms suspect that their costs have been hiked as a result.
The Ministers' letter makes the point that "the growing number of energy users striving to consume energy more efficiently and help towards achieving net zero see standing charges as a disincentive to doing so". This is highly pertinent to small businesses, the majority of whom are keen to play their part in reducing carbon emissions , and underlines the need for greater transparency around what standing charges are actually used to fund.
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