Energy Ombudsman Steps in to Support Small Businesses

On 19 December 2024, the scope of the Energy Ombudsman’s remit expanded to include small businesses, a welcome move in a time when energy costs and billing issues are placing increasing pressure on the commercial sector. If you run a small business, it’s more important than ever to stay vigilant about your energy bills — not just the costs, but the accuracy, terms, and your rights as a customer.

Small business threshold:

Those who can refer matters to the Ombudsman now include businesses who have:

1. Fewer than 50 Employees or their full-time equivalent and an annual turnover of at most £6.5 million or a balance sheet total of £5.0 million; or
2. An annual consumption of electricity of not more than 500,000 kWh, or
3. An annual consumption of gas of not more than 500,000 kWh. 

Be proactive: check your energy bills

One of the most common issues small businesses face is incorrect billing. You might be billed for more energy than you've used, charged on incorrect meter readings, or in some cases, not billed at all — which can lead to a large backdated charge later. It’s crucial to:

• Regularly review your energy bills.
• Compare meter readings on your bill with your actual meter.
• Make sure you’re receiving regular bills at all.

If anything looks odd or unclear, raise it immediately with your energy supplier. 

If there is any doubt or dispute over your meter readings or energy usage, request a site visit so the supplier can inspect the meter, check for faults, and ensure readings are being recorded properly.

Threats of disconnection: know your rights

Many small business owners feel pressured when energy suppliers threaten disconnection. But it’s important to understand that energy suppliers must comply with the Electricity Act 1989 and the standard conditions in their license to supply, and they cannot disconnect your supply for unpaid bills if the sums it avers are owing are genuinely disputed. 

These protections exist to ensure businesses aren’t unfairly cut off or locked in during billing disagreements.

Beware of deemed contracts and their high costs

If your business is using energy without a formal contract in place — for example, if you’ve moved into a new premises and started using the existing energy supply — you’re likely on what is called a “deemed contract.”

These contracts are set automatically when you use energy without negotiating terms and typically charge much higher rates than negotiated tariffs. If you are on a deemed contract, it is best to explore better rates or alternatives. 

Note however that suppliers are subject to rules in relation to deemed contracts. They are under a duty to take all reasonable steps to provide your business with the principal terms of the deemed contract and notice that other contracts may be available.

In addition, the charges levied under deemed contracts should not be “unduly onerous”.

If either of these have been breached, then there are grounds to challenge the charges.

When to involve the Energy Ombudsman

If you have raised a formal complaint with your energy supplier and it hasn’t been resolved within 8 weeks, or if the issue has reached deadlock, you can escalate it to the Energy Ombudsman. Their service is free and the customer has a choice as to whether or not to accept the proposed resolution. If you choose to accept it, the supplier must enact the resolution within 28 days.

The Ombudsman can help with issues such as:

• Incorrect billing
• Unfair charges or contract terms
• Problems with switching suppliers
• Poor service or delays

Seek assistance

We recently supported a small business client who was facing a large bill on deemed contract rates. Our team guided them through every step of the Ombudsman process, outlining the relevant rules and ensuring their case was clearly presented and fully supported with evidence. The Ombudsman ruled in their favour and the energy supplier has been required to rebill on their cheapest rates, provide a small amount of compensation for the inconvenience, and make a formal apology.

While larger businesses cannot refer matters to the Ombudsman, they should note that energy suppliers can be challenged if the charges they seek are not properly due or they do not follow the rules in their licence to supply.