Risky Business? How the energy debt protection gap is putting the pressure on small businesses
The cost of living crisis has hit microbusiness energy customers hard, leaving many struggling with rising energy debts. Unlike domestic consumers, microbusiness consumers do not have many protections regarding debt and disconnection practices, which allows for poor practice in the market.
We have analysed Citizens Advice case data alongside information from energy suppliers to identify 3 key ways in which the lack of rules is impacting microbusiness consumers - the microbusiness ‘debt protection gap’:
Inconsistent billing can cause debt to rack up. Under current rules, suppliers are only obliged to contact their microbusiness customers with a statement of account twice a year. This means debt can accrue without the business knowing.
Debt and disconnection practices are not covered by the fairness principle. SLC0A obliges suppliers to treat their business customers fairly, but debt and disconnection practices are not covered by this. We’re concerned that suppliers are not treating their customers with the fairness we would expect - for example, suppliers do not have to offer a repayment plan to a customer in debt.
Debt collection agencies cannot be held to account. SLC 0A does not extend to any third parties suppliers might work with, including debt collection agencies. Suppliers cannot be held accountable if the DCAs they work with treat businesses unfairly or break rules.
In order to close the microbusiness debt protection gap, we are suggesting the following changes be implemented:
Ofgem should work to introduce new rules requiring suppliers to provide bills to businesses at least quarterly, and to provide final bills within 6 weeks. Energy suppliers should help ensure that customers have enough information to keep on top of their energy bills.
Ofgem should amend SLC0A to include debt and disconnection in the Designated Activities. This will introduce an obligation on suppliers to treat consumers in debt fairly. In addition, new guidance should be produced setting out expectations for how this SLC should be followed, including consideration of reasonable repayment plans.
Ofgem should amend SLC0A to require suppliers to take responsibility for the third parties they work with. Ofgem should also work with energy suppliers to ensure that they have sufficient oversight of their debt and disconnection processes.