Factored Energy Arrangements: Pricing

Graham Leadbitter Excerpts

Wednesday 14th January 2026 Westminster Hall

[Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)]

I beg to move,

That this House has considered energy pricing for consumers with factored energy arrangements.

It is a pleasure to serve under your chairmanship, Mr Stuart. I am pleased to have secured this debate on a systemic regulatory failure that is quietly draining the bank accounts of residents across Scotland and the wider UK. We are in the midst of a cost of living crisis, yet large numbers of domestic residents are being charged inflated business electricity tariffs for the essential communal services that keep their buildings safe and functional.

In a nutshell, the issue is that in many residential developments, services such as stairwell lighting, fire alarms, lifts and door entry systems are powered via shared electricity meters. Despite that electricity being used entirely for domestic living, residents are routinely charged business energy rates. It is not a niche issue; it is a systemic failure driven by outdated rules and weak enforcement.

The financial harm to our constituents is stark. A typical communal supply, using around 1,000 kWh per year, would cost roughly £380 on a fixed domestic tariff. Under the frequently used standard variable business tariffs, that same usage can rise to around £1,465, an excess cost of approximately £1,100 per meter every year. Across a modest development of 75 flats, it can add around £12,000 annually to residents’ collective bills.

What makes that particularly galling is that many residents are entirely unaware of how their communal electricity is billed. They may not know whether it is on a separate meter, how many accounts are involved, or whether it is charged at domestic or business rates. The costs are simply absorbed into factoring charges, leaving consumers unaware of both the issue and their rights—unaware when they are being roundly fleeced for someone else’s failure to either act properly or correctly inform them. The root cause of the issue is simple: it is a regulatory mismatch. The problem sits at the intersection of Ofgem regulation, supplier interpretation and third party management structures.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing forward this debate. He and I spoke beforehand, but he might not be aware that consumers with factored arrangements in Northern Ireland were historically vulnerable to high, unregulated prices, similar to consumers in GB, but the Northern Ireland Assembly moved to correct that vulnerability. Does he agree that, UK-wide, those in communal schemes must have protection from gouging and be able to access better priced energy?

[Graham Leadbitter]

That is absolutely the case. To take Scotland as an example, consumers have a route to address complaints about this issue through the regulation of factors, but it is complex and cumbersome. There should be a simpler way to do it through the energy regulator, as I will touch on later in my speech.

Many communal meters are correctly classed as profile class 01, a domestic designation based on usage. However, where a property factor, managing agent or company holds the contract, suppliers often automatically apply the business tariff.

[Adam Dance (Yeovil) (LD)]

I thank the hon. Member for securing this debate. Business owner Gary Helliar, from Yeovil, signed an energy contract through a broker who convinced him that energy prices were going to rise to 35p per kilowatt and that the 15p kilowatt was a great deal. Energy prices have fallen below that, but Gary has been stuck in that contract and is facing bills of about £390,000. Does the hon. Member agree that we need greater oversight of energy brokers, so that local businesses are not pushed into rip-off contracts?

[Graham Leadbitter]

I certainly agree on that point. It is not entirely the purpose of my debate to address that issue today, but it one that I recognise. I think there has to be a route for people to challenge the advice they are given and to take to task those who have given incorrect advice, and that has to be reasonably simple. In many cases currently, it is not.

Ofgem’s guidance on domestic communal supplies, which suppliers ought to follow, is very clear: where the non-commercial collective purchase of energy is for mainly domestic use, that should be treated as a domestic supply, provided that the arrangement is not commercial in nature. That guidance makes it clear that classification should be based on how the energy is used, not on the legal entity holding the contract, yet in practice it is inconsistently applied and weakly enforced.

Inconsistent supplier behaviour has created staggering inconsistency across the energy market. Some suppliers, including Ecotricity, Octopus and OVO, correctly apply domestic rates based on usage and do not override domestic classifications simply because a factor is involved. However, others, including EDF, British Gas, E.ON and SSE, often default to business rates, based solely on the identity of the contract holder. Indeed, in research carried out by my office, representatives of EDF have explicitly stated that they

“override the domestic classification if the usage is for a communal area managed by a business entity”.

That is in clear contradiction to Ofgem’s advice. The result is a supplier lottery. Two identical buildings on the same street can pay vastly different amounts for the same stairwell lighting, purely because of which supplier the managing agent selected.

The lack of regulatory oversight is deeply frustrating for our constituents. No meaningful reform has followed the 2023 call for evidence and multiple parliamentary questions. The current Government have carried out some further consultation, but have not yet moved things on, either. When I come to my conclusion, I will have specific asks for the Minister in that regard.

In April 2024, the Minister’s Department suggested that, due to physical set-ups, these consumers would continue to receive energy via non-domestic contracts. I have additionally met Ofgem on this issue. It recognises the problem, but consistent standards have not been enforced. Residents who do not choose their supplier are excluded from key domestic protections, including price cap coverage and Energy Ombudsman access. They are effectively trapped. More worryingly, when debts arise, suppliers may pursue residents directly as the “end users”, despite residents having no control over the contract. It is a Catch-22, where responsibility exists without authority, leaving residents unable to discuss the debts they are being chased for, because they do not hold the contract. If residents wish to complain, they often find the ombudsman route unavailable to them because the contract is held by a third party, leaving courts or tribunals as the only effective route for redress.

I therefore have six targeted and practical policy asks of the Minister. No. 1 is to reform standard licence condition 6 in order to prioritise actual usage over contract structure. No. 2 is to mandate a standardised appeal process for tariff classification across suppliers. No. 3 is to enforce profile class integrity, so that domestic or PC 01 meters are not billed at business rates. No. 4 is to strengthen Ofgem’s enforcement powers, so that protections are enforceable and not just advisory. No. 5 is to reopen the Department for Energy Security and Net Zero call for evidence and commit to legislative change. No. 6 is to ensure that residents under third party communal contracts can access the Energy Ombudsman.

The current system is a failure of logic and protection and a further cost of living blow to the people who can least afford it. We are effectively telling residents that, because they live in a flat with a shared hallway, rather than in a semi-detached house, they must pay business prices to power their light bulbs and fire alarms. To put it simply, the current situation is like someone being charged a commercial freight rate for a first-class stamp simply because the person posting the letter for them happens to be a professional administrator. It is time that the Government and Ofgem ensured that domestic use always equals a domestic price, and that residents are made fully aware of their rights when communal energy arrangements are put in place.