Energy suppliers are stepping up support for small businesses trapped in sky-high energy contracts, even as the price of wholesale gas falls.
British Gas and Octopus have introduced ‘blend and extend’ contracts, following calls from the Federation of Small Businesses to cut rates for struggling companies that committed to the market spike last summer.
Businesses that settled their bill between July 1 and December 31, 2022, were paid £1 per kWh for electricity, according to the lobby group.
Merge and Expand: British Gas allows customers to reduce bills following calls from the FSB
Small businesses are among the biggest victims of the cost-of-living crisis, with food and retail businesses particularly hard hit.
The FSB says a significant portion of companies trapped in excessive permanent contracts are in the hospitality industry.
We’ve put together a list of some of the support offered and what you can do if you’re struggling to pay your bills.
What support is the government currently offering?
When higher prices first trickled down to customers, businesses were largely left without support, before the introduction of the Energy Bill Relief Scheme.
However, this has since come to an end, leaving small businesses once again struggling to pay their bills.
The less generous Energy Account Discount Scheme, which took effect on 1 April, offers companies a discount on the unit price of gas and electricity and is available for permanent contracts concluded on or after 1 December 2021, but also for non-contractual rates.
Rather than a flat rate, the amount companies pay when the discount is applied depends entirely on the rates they are currently paying to their supplier.
Below we explained how this works.
What support do suppliers offer companies in difficulty?
Given the lack of substantial government support, energy suppliers have been forced to step in to help customers on the brink.
The FSB specifically called on suppliers to allow companies to renew their firm contracts at a mixed and lower rate, between the original flat rate and the current, lower wholesale rate.
This would be offered to companies that negotiated a new contract between July 1 and December 31, 2022.
This week British Gas announced it would offer ‘blend and extend contracts’ to companies with higher rates, to spread costs over a longer period of time.
The company said it would “help some companies with the option to extend their existing contract length by 12 months.”
British Gas said it would at least look at those who repaired between July 1 and December 31, 2022, but it’s those with higher rates that will benefit the most.
Eligible companies will be contacted in the coming months.
Tina McKenzie, the policy chair of the FSB, said: ‘Allowing small businesses to get out of the energy contracts they made during the market peak last year is vital to their survival.
“British Gas would do well to take up our call and give small businesses the opportunity to ‘blend and expand’.
“We hope this will become available to all small business customers stuck in flat rates from last year’s peak period. Now it’s time for other energy suppliers to follow suit.’
Octopus Energy and SSE also told This Is Money that they also had “blend and extend contracts” for business customers.
A spokesperson for Octopus Energy said: ‘We monitor wholesale prices and if there are discounts, we pass those savings on to customers by lowering our rates even further. This meant last month alone that we were able to reduce our variable corporate rate price by 40 percent.
‘Business customers with a fixed rate from last year can already benefit from reduced wholesale prices through the ‘blend and extend’ rates that we offer. That way we can immediately lower their prices.’
British Gas provides energy subsidies to some corporate customers and has said it will give priority to pubs, cafes, restaurants, hairdressers, retailers and charities
Octopus said it had been offering the contracts for a few weeks.
An SSE spokesperson said: “We recently took the step to extend payment terms for those companies that struggled last summer with the impact of long-term contracting at the peak of commodity prices.”
British Gas has also announced £15 million in grants to help with energy costs, which may help businesses somewhat.
However, if this were shared among its 350,000 corporate clients, it would pay out less than £43 per company.
British Gas has said it will mainly provide grants to pubs, cafes, restaurants, hairdressers, retailers and charities, but other eligibility criteria are unclear.
What to do if you are having trouble paying your bills
If it’s getting harder and harder to pay your company’s bills, talk to your supplier first.
It is important to act quickly, because your energy supply could be cut off if you do not make arrangements with your supplier to pay off the debt.
Most suppliers are accommodating when it comes to handling payments. Octopus Energy said it offered tailored support options for its customers, including payment plans and payment holidays.
SSE also said it had “actively taken measures” to help small businesses and had already extended payment terms.
If you’re a ‘micro business’, according to Citizens Advice, you can only be billed for energy you’ve used in the last 12 months. If you think you have overpaid, call your supplier and complain.
You can also consider making your business more energy efficient, but this depends on having enough money to pay for expenses such as low-energy light bulbs and insulation.
Some links in this article may be affiliate links. If you click on it, we may earn a small commission. That helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any commercial relationship to compromise our editorial independence.