The FSB (Federation of Small Businesses) has commissioned a new report that proposes a new, fairer way of approaching the purchase of energy by small businesses.
Poor bargaining power
Open energy: Using data to create a smarter, cheaper and fairer energy market, produced by Fingleton Associates, is the result of the FSB’s concerns about the way in which small businesses fall through the gaps in the energy market and have the least power or consideration of any purchasing group.
The report points to previous research by the FSB, which identified a number of areas where small businesses are disadvantaged in utility markets, compared to large businesses and domestic consumers. The research found that many small firms are held back by:
- A lack of expertise in purchasing energy
- High opportunity costs of purchasing decisions
- A perception that they have little to gain, whoever they buy their energy from
- poor bargaining power
- A lack of market resources compared to bigger businesses
- Little market protection compared to domestic consumers.
FSB national chairman, Mike Cherry, said: “Small businesses are often the worst hit by an energy market that simply doesn’t work for them.
“Too often we hear stories of smaller firms being overcharged or being stuck on the most expensive tariffs.”
The FSB wants to see a new, smart energy market that acknowledges a diverse customer base and enables smaller businesses to make holistic decisions. It wants small business customers to be empowered to understand their options, choose what services they pay for, know where they can find the best deal and where they can save energy, and understand where and how their energy is generated.
Fingleton Associates CEO, John Fingleton, said it’s clear that small businesses buying energy in the UK find the market “somewhat confusing” and that they are “not always able to switch with confidence.”
“It is also clear that switching can bring huge benefits in terms of lower price and better service, and longer term in forcing suppliers to be ever more efficient and responsive to consumers, and in rewarding innovative new entrants.”
The FSB chose Fingleton Associates to produce its report due to the company’s work on the Open Banking concept. The report demonstrates how energy data could be securely shared and used to empower customers and underpin the smart and sustainable energy market of the future.
The Open Energy concept would introduce a number of critical reforms, including:
- Standardising tariffsand other relevant market information in machine-readable formats to allow automated comparisons of energy tariffs.
- Making smart meter dataavailable to approved third parties through a secure standardised Application Programming Interface (API).
- Allowing energy customersto delegate contract switching powers to third party intermediaries.
It’s expected that these reforms would increase switching rates and create opportunities for innovative uses of data, including demand-management purposes that could increase the proportion of the total energy mix from renewables.
“Open Energy, like Open Banking, has the potential to transform the market – if implemented correctly,” said Mike Cherry.
“It would help small businesses to be more energy efficient and empower them to make energy choices that are cleaner, greener and more sustainable.”
John Fingleton said: “Opening data across the economy, and giving individuals control over the data they produce and allowing innovators to combine data from areas like banking, energy and beyond to create powerful tools for simplifying our lives.
“This could lead to a great unbundling of services away from complex offerings that suit incumbents at the expense of customers, towards models that are simple and easy to understand.”
Are you confused by the energy and utilities markets and now sure how to switch – or who to switch to? The Money Saving Expert has a regularly updated advice page that provides useful pointers, helping you make the best decision for your small business. Don’t stay stuck on that high tariff or confused by what you’re getting for your money. A little time spent on research may save you hundreds of pounds!