New energy business compensation powers for Ofgem to benefit small businesses

If the proposals were put into place, Ofgem would be able to order suppliers to compensate consumers, including some small and micro-businesses. This would be either on a ‘pound for pound’ basis if the loss is measurable or on a ‘goodwill’ basis if it isn’t. The proposal also covers rectifying the issue that led to the fine in the first place; once Ofgem is satisfied a legal responsibility has been broken it will have the power to order the company to remedy the consequences of the breach. This will ensure that other customers do not suffer or lose out because of the same issue.

However, from a business perspective, compensation orders could only be applied where a supplier has broken a license condition, and fewer license conditions apply to small and micro-businesses than apply to domestic customers, while larger businesses aren’t covered at all.

To be eligible for compensation under the proposals, a business would have to:
Use no more than 55,000 kWh of electricity/200,000 kWh of gas a year; or
Have fewer than ten employees (or their full time equivalent); and an annual turnover or annual balance sheet of €2 million.

James Constant, Managing Director of uSwitch for Business, welcomes the move but does not think it goes far enough: “On the whole this is a positive move, particularly as it has been extended to small businesses. However, in our view it does not go far enough. Based on number of employees alone, at least 200,000 of the UK’s larger businesses will not be eligible for compensation under the proposals, and when you also take into consideration energy consumption and turnover the actual number is likely to be much higher. Because license conditions do not extend to larger businesses, many of them will not be covered – despite the fact that they are no less likely to fall prey to wrongdoing. We call on DECC to introduce license conditions and plans to safeguard all businesses.