Small businesses can get hit with huge energy bills due to incorrect billing. We’ll tell you how to stop this happening to your business.
All small businesses – whether start-ups or ongoing concerns – are more exposed to the vagaries of cashflow than bigger companies with deeper pockets and established assets. An unexpected demand for a large payment could be all a small business needs to send it into administration.
This is why small businesses should scrutinise their energy bills to ensure they are not being over-charged or – worse – under-billed by their energy supplier.
Last year, Consumer Focus, the statutory watchdog for energy consumers, received 1,848 complaints from micro-businesses – defined as having fewer than 10 employees and an annual turnover of less than £2 million – who had received unexpected bills after their energy charges were underestimated by their supplier.
Despite back-dated charges often being the result of mistakes by the supplier, energy companies can ‘back-bill’ businesses for up to six-years of usage, compared to just one year for domestic customers. Most worryingly they can demand instant repayment. Small firms are covered by the same complaints handling standards and rights to redress as consumers, yet do not enjoy the same basic protection on back-billing.
Energy costs are a significant overhead for many small businesses, with 19% saying energy accounts for between 5 and 10% of their overheads. For one in 10 small businesses, energy accounts for more than 10% of total overheads, spending an average of £9,000 a year on their energy bills and one in five (20%) spending over £10,000.
In order to safeguard your business against the financial shocks of a huge energy bill you haven’t budgeted for, we offer the following tips:
- When you move premises, register with a supplier straight away – Check thoroughly to see if there is more than one meter for each type of energy, read the meters, and make sure your supplier has your correct business name and address.
- Give regular meter readings – Energy suppliers must read the meter at least every two years but registering correct meter readings over the phone every time you get a bill will help avoid debts piling up.
- If you think you’re paying too little, contact your supplier as soon as possible – Fixing the problem early on will avoid building up a big debt that’s harder to pay off.
- If you do get hit with a big bill, call your supplier straight away – Ask them to explain what went wrong. Even though suppliers can currently demand repayment of the whole debt in one go, try to negotiate repayments you can manage.
- Get a smart meter installed – Don’t wait until 2020 for your energy supplier to provide you with a meter – pay them to install one for you immediately. You’ll need a broadband connection, but the meter sends precise details of your energy consumption to your supplier (no more inaccurate bills) and lets you monitor how much energy your business uses and what it’s costing you.
- Install low energy light bulbs – Where possible, change standard light bulbs for low energy light bulbs. They provide the same amount of light, but use only 20% of the electricity and last up to 15 times longer. Costs vary, but you can expect to pay £5-9 per bulb. However, over its lifetime, each energy-saving bulb can save you up to £50 in running costs.
- Standby means “bye-bye” to your cash – Don’t leave electrical equipment, such as computers and photocopiers, switched on or on standby mode for long periods when not in use. Also, check if there are any energy saving modes that can be enabled on your IT equipment. The simplest step you can take to reduce energy costs from electrical appliances and equipment is to encourage your staff to turn them off completely when they’re not needed.
- Re-program your heating thermostats – If you have an office with lots of computer and other electrical equipment that discharges heat, after a few hours, the heat build-up can merge with the heat generated by the central heating and make the office too hot. Anticipate the heat build-up and re-program the central heating thermostats to reduce the heat late morning and then gradually lower throughout the day.
- Grants and low-cost loans – Grants, generally from public funds, are sometimes available to assist with the capital costs of an energy efficiency investment. Low-cost or interest-free loans for energy efficiency investments are also sometimes available, particularly for small businesses.
- Suppliers do get it wrong – If you believe this is the case and can’t resolve the situation with your supplier, take your case to the Energy Ombudsman. You can also contact the Ombudsman if you took all reasonable steps to ensure your bills were correct and think your supplier has been negligent in allowing debt to build-up.