British companies are calling on the energy watchdog to crack down on bad behavior by suppliers

A leading business group has urged the UK’s energy regulator to take urgent action against suppliers who mistreat business customers, as high gas and electricity costs continue to put many small businesses at risk of collapse.

In a letter submitted to the Financial Times, the Institute of Directors ofgem called on it to “secure a well-functioning market for non-domestic customers” after a survey of its members found that about one in five had “at least some form” the negative behavior of their energy supplier.

The most common problems cited by the nearly 1,000 small business owners surveyed in January included demanding a larger portion of the bill up front, a refusal to negotiate payment terms and a refusal to renew a contract.

Other IoD members pointed to failures in processing refunds and notifying rate increases, as well as steps by suppliers to bill them every month instead of every three months while noting that their energy costs remained twice as high as last year.

The letter comes after Ofgem was accused of “sleeping at the wheel” following reports of misconduct in the domestic market and ahead of the completion of a review by the Business Markets Regulator.

Chancellor Jeremy Hunt has asked to have the results ahead of his spring budget on March 15, with the government expected to cut energy subsidies to businesses in April.

Rebates on bills – which came into effect after the Ukraine war pushed up prices – are expected to be much less generous than they are at present, although there will be additional support for companies in “energy-intensive” sectors such as manufacturing.

In a separate IoD survey assessing optimism among business leaders about the UK’s economic outlook, more than 40 per cent cited energy costs as one of the top “negative issues” facing their organizations.

The IoD also warned that its members were being tricked into signing energy supply contracts that insisted on the inclusion of ‘take or pay’ clauses in which they were forced to purchase an agreed amount of energy from a seller by a specified date or pay a fixed penalty.

The group said this practice undermines the ability of non-residential customers to both reduce their energy consumption and switch to alternative, low-carbon forms of energy supply.

In his letter, IoD Director General Jonathan Geldart urged the regulator to identify the concerns raised by companies and take action to address them.

Geldart told the Financial Times: “At a time when energy prices are at an all-time high, it is important that the energy regulator ensures that any unnecessary burdens on businesses are removed.”

Ofgem said it was “aware that some companies are struggling to obtain firm energy quotes and are being asked to make large down payments by some suppliers”.

“We are working with governments and stakeholders to determine if further action or support is needed to help businesses, in addition to checking compliance with existing requirements,” she added.

In a letter to Ofgem in January, Hunt said concerns had been raised “about particular challenges faced by some non-domestic customers in the energy market [relating] both pricing and the availability of tariffs, including increased subscription fees, unaffordable contract renewal terms and, in some cases, decisions by individual providers to withdraw from serving certain sectors.”

In response, Ofgem CEO Jonathan Brearley confirmed that the regulator was reviewing the overseas market and that it would launch a further appeal for evidence on the companies’ experience dealing with vendors.

“We will look at where we may need to make changes to the regulations and also look at whether suppliers are compliant with existing requirements,” Brearley said.