Small business energy standing charge sharply increases

Small businesses across the UK have seen energy standing charges increase very sharply over the past few months with some reporting increasing of over 1000%. Furthermore, 62% of small businesses have said that the ever increasing cost of utilities continues to one of the main drivers for increased business costs.

Ofgem (energy regulator) are yet to take any serious action against energy companies hiking up standing charge prices. The Federation of Small Business has called for Ofgem to take some action and address this issue more transparently.

What is an energy standing charge?

The energy standing charge is a fixed daily fee imposed by energy suppliers to cover the cost of supplying energy to a property, regardless of the amount of energy consumed.

How are the high energy standing charges affecting small businesses?

This is having a huge impact on small businesses energy bills because there is nothing they can do to reduce energy suppliers standing charge. SME’s can choose to limit their energy consumption to reduce their bills, however, forcing small businesses to reduce their energy consumption can lead to reduced growth, confidence and the ability to invest.

What about the energy price cap?

Unfortunately, business energy customers are not covered by the energy price cap as this only applies to domestic use. Therefore, business energy tariffs can increase standing charges and consumption rates at any time if the business is not on a fixed tariff. Some businesses believe that this is the reason they have seen their standing charge increase because energy suppliers are unable to increase standing charges for domestic customers.

What are standing charges used to fund?

Energy firms use standing charges to fund the maintenance and upkeep of the energy infrastructure, including the distribution network, and meters, and ensuring reliable supply to customers. Additionally, standing charges contribute to covering administrative costs associated with billing and customer service.

How can small businesses reduce their energy costs?

Small businesses can reduce gas and electricity bills by implementing various strategies such as conducting energy audits to identify areas of inefficiency, investing in energy-efficient appliances and equipment, utilising programmable thermostats and smart lighting systems to control usage, implementing insulation measures to minimise heat loss, encouraging employee awareness and participation in energy-saving practices, negotiating competitive energy tariffs with suppliers, and considering renewable energy sources like solar panels where feasible. A number of local authorities also offer grants to help subsidise capital investment aimed at reducing energy consumption.

Additionally, regular maintenance of equipment and facilities can help optimise energy performance and reduce overall consumption, ultimately leading to cost savings for the business.

How can we help?

Hawsons has a dedicated team of small business accountants in Sheffield, Doncaster, and Northampton. Our Small Business Services Department is dedicated to helping smaller businesses, providing a range of tax and accountancy services to small and growing businesses. We generally help sole traders, partnerships, and limited companies.

Find out how our small business accountants can help you.