Energy Supply Market: Small Businesses

Amanda Solloway Excerpts

Wednesday 13th September 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

It is a great pleasure to serve under your chairmanship, Ms Fovargue. I thank my hon. Friend the Member for Aberconwy (Robin Millar) for securing this incredibly important debate, and I thank all who have taken part.

I know that my hon. Friend the Member for Aberconwy has been working tirelessly to try to ensure the best outcomes for businesses in his constituency and more widely. I was a beneficiary of that when I went to Conwy earlier this year on holiday with my daughter and granddaughter. He will know from our recent meeting that for me, as Minister responsible for energy consumers and affordability, it is really important that both domestic and non-domestic customers get the service they deserve. That is and always has been one of my priorities. Yesterday I met Kate Nicholls from UKHospitality, whom I have met on many occasions. I will continue to meet representatives from all sectors to understand their experiences and find out how we can support them.

My hon. Friend the Member for Aberconwy knows that the energy crisis has impacted households and businesses alike. Despite volatility in the energy market, exacerbated by Putin’s illegal invasion of Ukraine, the non-domestic energy market has remained more stable than its domestic counterpart. In part, this can be attributed to the factors that differentiate the non-domestic market from the domestic market, such as different supplier hedging strategies, risk sharing with customers, and bespoke contracts for businesses with different energy requirements.

However, we do recognise the difficulties that businesses continue to face, with energy bills much higher than historical norms. That is why the Government have stepped in to provide unprecedented levels of support for business energy costs. The energy bill relief scheme provided £7.4 billion of support for more than 1.9 million energy contracts. Obviously, it would have been unsustainable for the Government to continue to support such large numbers of businesses at the level of the energy bill relief scheme. The Government have been clear that the levels of support provided under the energy support schemes are time-limited and are intended as a bridge to allow businesses to adapt.

We believe that the energy bills discount scheme provides balance. With wholesale gas prices now at lower levels than before Putin’s invasion Ukraine and having almost halved since the energy bill relief scheme was announced, the energy bills discount scheme supports businesses until April 2024 and limits taxpayer exposure to volatile energy markets. The Government are also committed to providing the right tax environment for businesses to invest and grow. In his autumn statement, the Chancellor announced that the Government are going further to support high street businesses by reducing the burden of business rates with a package worth £13.6 billion in total over the next five years. This included freezing the business rates multiplier for another year to protect businesses from rising inflation, and increasing relief for retail, hospitality and leisure from 50% to 75% for 2023-24—up to £110,000 per business.

In addition to financial support, I have been clear in numerous meetings with energy suppliers and in my ongoing meetings with Ofgem that it is essential for energy suppliers to provide all customers with clear communications to enable them to understand their energy contracts and the options available to them. I continue to encourage all suppliers to proactively reach out and speak to their customers. As a result of our work with suppliers, we have seen some offering, as has been discussed throughout the debate, a blend and extend option, where some costs are reduced and payments are spread over a longer period. It is, of course, the responsibility of the supplier to ensure that customers can make an informed decision, including understanding the impact of the renegotiations—such as blending and extending their existing contracts—and what that means for their entitlement to energy bills discount scheme support, and the costs and benefits over the short and longer term.

I know that specific concerns have been raised about the hospitality sector, and my hon. Friend the Member for Aberconwy raised them again today. As I discussed with UKHospitality yesterday, although these are commercial matters I will continue to press suppliers to ensure that they treat all businesses based on their individual circumstances and do not take a blanket approach to the sector. The changes that Ofgem is already making following its recent non-domestic market review, and the work that we in the Government are doing, will improve the situation for all sectors, and I know that UKHospitality is supportive of all the measures.

The non-domestic energy market has not required much intervention in the past, as it broadly delivered good outcomes for business customers. However, the energy crisis has exposed areas where consumer protections can be improved for business customers, especially our small and medium enterprises, as everybody in the debate has mentioned. Ofgem conducted a review into the non-domestic energy market. It published its report findings in July, alongside policy consultation questions related to its proposals. We welcome its findings and believe it is vital that businesses receive good customer service and support from their energy supplier and any third-party providers.

Ofgem is investigating potential breaches of licence conditions and rules for certain suppliers through its compliance processes, and it will not hesitate to take enforcement action if necessary. However, we know that it is not just about compliance against existing rules. We want to ensure that businesses understand how they receive their energy. Ofgem’s non-domestic review findings proposed several regulatory changes that will improve a business customer’s experience with their supplier and energy broker, such as expanding transparency on energy broker commissions to all businesses and expanding access beyond microbusinesses to the alternative dispute resolution service for third-party intermediaries such as energy brokers.

The changes, along with other initiatives—such as a new code of conduct for third-party intermediaries being developed by the Retail Energy Code Company—will address some of the key challenges we have heard from businesses. We will closely monitor progress in this space to see whether further Government action is needed. We understand that the Government can play an active role in improving the experience of businesses with their energy contracts, which is why we are exploring how the energy ombudsman can support more businesses with their energy issues by expanding access to dispute resolution between customers and suppliers to more than just microbusiness customers. We plan to consult on any proposed changes to ensure that stakeholders can express their views before any final changes are enacted. We are already in discussions with interested groups and will continue to engage proactively.

I reiterate that the Government and I are committed to improving the retail energy market for households and businesses alike. We have recently set out a new vision for the future energy retail market to ensure that it works better for all consumers, while guaranteeing that the market returns to a resilient and investable state and supports system transformation. I sincerely thank my hon. Friend the Member for Aberconwy for securing the debate and for the work he has carried out on supporting businesses with their energy concerns. I look forward to continuing to engage with him on this incredibly important matter to ensure that our British businesses can thrive.