Ofgem launches review of £3.5bn microbusiness energy market

The regulator is concerned some small businesses are struggling to engage with the market and paying more for their energy

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Ofgem has announced a strategic review of the microbusiness energy market in an effort to better understand and address the issues faced by smaller firms.

It comes as the regulator previously found microbusinesses are paying more for their energy than they should and struggling to engage with the market.

Its initial analysis also shows market information is often inaccessible for them, which results in microbusiness customers paying high prices “and struggling to make informed decisions”.

A non-domestic customer is a microbusiness if it employs less than 10 employees and has an annual turnover or balance sheet no greater than €2 million (£1.7m), uses no more than 100,000kWh of electricity per year or no more than 293,000kWh of gas annually.

There were more than five million microbusinesses in the UK in 2018, account for a third of employment and 21% of turnover – and last year paid £3.5 billion in total in gas and electricity bills.

Ofgem says the complexity of the market with a wide variety of contracts and “lack of accessible helpful information” about prices means many microbusinesses find it hard and costly to engage in the market to find a better deal.

Its analysis found providing clear prices to microbusiness customers through a quotation tool on suppliers’ websites or price comparison sites following since 2017 – following the Competition and Markets Authority’s recommendation – has improved the level of price information available but has had a limited impact on engagement levels and failed to address some of the fundamental problems in the market.

The regulator intends to gather further evidence before publishing its action plan later this year.

It is seeking views and evidence at each stage of the customer journey until 21st June 2019.

Anthony Pygram, Director of Conduct and Enforcement at Ofgem said: “Microbusinesses are the backbone of the country’s economy. Yet too many are still finding it hard to navigate what is a complex and at times opaque market to get a better energy deal and are suffering significant consumer detriment as a result.

“Our review announced today, combined with our continued work with the government and industry, aims to deliver a properly functioning competitive retail energy market which works for all microbusinesses.”

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