Your independent energy adviser
0800 051 5770

Publish Tariffs to Help Business Energy, Say Small Businesses

Would published tariffs be of benefit to the business gas and electricity market?

The Federation of Small Businesses, in their latest energy survey, put exactly this question to their members.

18% responded, a total of 1,434 small businesses, and their conclusions were a surprise, to us at least.

  • Nearly half (49%) of businesses believe publishing tariffs “would have a positive impact on their business”

Of those who believed a market that aped the much-criticised domestic energy market was a good idea:

  • 77% believed it would make the tariffs easier to compare

And perhaps more surprising still:

  • 60% believed it would lead to a reduction in prices

Even more bizarrely, considering only 4% of respondents used the services of a TPI:

  • 32% believed it would remove the need for a TPI

We find this apparent train of thought as surprising.

In our discussions with the FSB we have highlighted the economic principles that undermine the concept of published tariffs being beneficial to the consumer and have also pointed to the clear, and discouraging parallels with the domestic market.

The domestic market is characterised by 6 dominant suppliers, who though the accusations of being a cartel have been roundly dismissed, are the subject of a Competition and Markets Authority Investigation, and whose prices move with a consistency and uniformity of direction, timing and magnitude.

Domestic customers see one price change per year, occasionally two. Keeping these price changes to a minimum keeps the price inflated as suppliers look to avoid energy market price spikes by ‘pricing in’ all eventualities.

This has led to the outcry of uniform price movement and the accusation of ‘rip off’ Britain.

The non-domestic market doesn’t work like this.

Every business can contract on its own merits.

They can negotiate their own bespoke price and contract length with any supplier they choose. They can do so safe in the knowledge that their price will be fixed for anything up to 5 years and that the ‘characteristics’ of their neighbours or postcode will have absolutely no bearing on their price.

Indeed a business energy customer always has the opportunity to negotiate a good deal for their business time and time again under the current arrangements.

It is against this backdrop that we find the FSBs position utterly unfathomable.

Why they would choose to promote the move from a market that delivers proven benefit to engaged parties to one that enshrines high prices and little choice is utterly unclear.

What we do believe however is that the FSB are failing to encourage their members to engage in the energy market. This can only be to their detriment.

Just 4% of those surveyed used a TPI (Third Party Intermediary). The FSB must take responsibility for this reluctance.

For a reason we are yet to understand the FSB do not appear to support the existence of TPIs in the energy market, that is despite TPIs addressing much of the issues that small businesses encounter in the market.

This is further compounded by their desire to push their members to an unworkable and unattractive ‘solution’ in the concept of published tariffs that can only work to the detriment of businesses already sensibly engaged in the market.

Happily some of the FSBs members can see the folly of their policy with:

  • 67% believing a potential negative effect of published tariffs would be the prevention of being able to negotiate a “best price”, and
  • 33% believed its implementation would actually increase prices

We can only hope that the FSB take heed of the realities of the business energy market before they lead there members too far along a road to financial agony.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.