A price comparison service has called for a “retail price cap” to protect businesses, following the introduction of the domestic price cap.
Phil Foster, chief executive of Love Energy Savings, said small businesses are “suffering” because there is “no regulation to protect them from the third party companies (TPCs) that are overcharging them”.
According to a briefing document prepared by parliament, there are around 5.7 million small and medium sized enterprises (SMEs) in Britain.
These could potentially be spending £5.7 billion too much on their energy bills – according to research conducted by Love Energy Savings.
Foster said: “It is understandable that Ofgem wants to protect the domestic market. They’re looking out for the most vulnerable, typically the young and old.
“But there’s a real lack of transparency for business owners looking to improve their tariff.
“Regulation is needed for the increased charges incurred through third parties. We need a price cap, but in retail rather than on the wholesale price.
“The typical wholesale unit price is around 13.5p, and then on average a third party will add something along the lines of 2p on top.
“Anyone above that percentage will be overpaying.”
Ofgem’s domestic price cap rules cover the unit price of energy and standing charges — capping electricity at 17p per kWh and gas at 4p per kWh.
Foster says similar rules for the commercial sector would be unfair on energy companies as “typical usage” will fluctuate depending on the type of business — so new regulation should be aimed towards third party costs added on by brokers.
These will typically negotiate a base rate with an energy supplier before a margin is then applied. The combined sum is what a business ends up paying.
But, he says, some suppliers are allowing brokers to apply an uncapped margin — ultimately short-changing the customer.
Foster said: “You can’t regulate a market when you don’t know who’s in it, and Ofgem have no idea how many third party intermediaries are operating — not a clue.
“There’s no central register, there’s no accreditation code, there’s nothing.
“Before we can start looking at what’s being offered to business customers, let’s try and understand who’s in the market in the first place.”
He added: “This lack of regulation of the suppliers is allowing brokers to swoop in and prey on the weak, locking them into sky-high tariffs.
“There’s currently no protection for small firms. Often customers don’t even know they’re being ripped off.
“And some suppliers are actively incentivising third-party intermediaries to apply larger margins. That shouldn’t be allowed.”
In response to the claims, an Ofgem spokesperson said: “The business energy market is not unregulated.
“Ofgem has been acting against suppliers previously for failures in customer service.
“This includes securing a £9.5 million redress package in from British Gas Business in 2017 following failings in its registrations, complaints handling and billing processes for business customers.
“Measures are in place to help businesses get a better deal on bills. These include the Competition and Markets Authority’s reforms to stop locking micro-businesses into automatic rollover contracts and to make it easier for microbusinesses to compare the cheapest energy prices.
“We will also be conducting a strategic review of the microbusiness retail market in 2019 to understand market challenges and consumer experience.
“The review will identify the case for short and medium-term actions.”
In November last year, the comparison site said it expects to quadruple its customer base and double annual profit by 2021, based on current growth.
Last month, Love Energy Savings announced the launch of a new online engine which will enable business customers to switch their energy provider online for the “first time ever”.