Small firms and schools get protection from rip-off energy contracts

Businesses will be given extra protections later this year (Gareth Fuller/PA)

Thousands of small businesses, schools and charities will be given extra protection from being ripped off in their energy contracts under new rules announced on Thursday.

The Government and Ofgem said companies with under 50 employees – around 99% of all firms in Great Britain, will be brought under the umbrella of the Energy Ombudsman.

Companies with fewer than 10 employees had already been covered by the protections, which allow them to get free support from the ombudsman in a similar way to households.

But the expansion extends that option and other protections to another 200,000 businesses, the Government previously said when it started to consult on the changes.

While households are protected by the ombudsman, many businesses have not been in the past. Instead, businesses were expected to be more savvy and shop around, which was meant to root out foul play in the sector.

Unlike households, small businesses often use so-called energy brokers, which are meant to find them the best deal.

Energy bill — The move is designed to protect firms against being ripped off in their energy contracts (PA)

“This can leave smaller organisations vulnerable to unfair fees, with only the courts as a route to redress,” the Department for Energy Security and Net Zero said on Thursday.

The change from the Government which allows small businesses to go to the ombudsman comes side-by-side with changes from energy regulator Ofgem designed to protect the same companies.

These changes include a requirement for brokers to “provide full transparency over fees” in the contracts, which allows their business customers to assess what they are getting.

Energy suppliers will also be banned from working with brokers who are not signed up to a redress scheme.

Some of the changes will come into force from July 1, others by the end of the year.

“Too many businesses have experienced issues with some energy suppliers, from difficulty getting the right contracts, unexplained price hikes, and poor customer service,” said Ofgem director general for markets Tim Jarvis.

Small and micro businesses can be defined by how many people they employ, but can also be defined based on their gas or electricity use.