Small businesses paid around £280m more than they needed too for their energy between 2007 and 2014, “conservative” new figures from government watchdog the Competition and Market’s Authority (CMA) reveal.
Of that amount, approximately £230m was paid by microbusiness customers, according to the CMA’s long-awaited Energy Market Investigation.
“Despite this conservative approach, we believe that the size of the detriment that we have identified is significant,” the CMA said.
It has been investigating the energy market since June 2014 following a referral by Ofgem.
“The annual profits in excess of the cost of capital amounted to 6% of average annual microbusiness revenues for the Six Large Energy Firms from FY 2007 to FY 2014. This suggests that prices may have been on average 6% higher between FY 2007 to FY 2014 than would have been the case in a better-functioning market,” it added.
The CMA has now out a package of actions to tackle the problem and help businesses, and in particular microbusinesses, “exploit the benefits of competition”.
It is proposing improved price transparency, requiring suppliers to disclose the prices of all their available acquisition and retention contracts to their microbusiness customers.
Suppliers must also disclose their out-of-contract and deemed contract prices on their websites.
The CMA also wants to ban auto-rollover contracts that restrict businesses’ ability to switch. It also says that microbusinesses should be given longer termination periods with no termination fees.
In addition, suppliers should prompt microbusiness customers to engage and disclose the details of their “most disengaged” customers to rival suppliers.
“In relation to benefits, we consider that there is substantial scope for price reductions and that the remedies would still be proportionate if they led to only a small reduction in prices for microbusiness customers,” the CMA added.