In this guest post, Arun Rao, Senior Policy Researcher at Citizens Advice, discusses supporting microbusiness energy customers and Citizens Advice’s new good practice guide.
The COVID-19 crisis means that many microbusinesses are under more financial pressure than ever before- and so are the companies that serve them. Energy is an essential service for these businesses. However, even before the current crisis, the non-domestic energy market was not working well enough for the smallest of these.
Citizens Advice is the official body for microbusiness energy consumers across Great Britain. We support thousands of microbusinesses each year through our consumer service helpline and Extra Help Unit, and conduct qualitative research with these consumers. This gives us a unique understanding of the issues these consumers face in the energy market.
We’ve published our new good practice guide to help energy suppliers improve the support provided to their customers. The guide builds on insight from interviews with energy suppliers and support services such as Business Debtline.
In our report last year – Closing the Protection Gap – we identified two key issues that businesses tell us about: debt and disconnection practices and brokers. Our good practice guide identifies ways in which suppliers can seek to tackle problems in these areas and provide more support to their customers as a result.
Debt and disconnection
As a result of the ongoing Covid-19 crisis, it’s likely that more small businesses will have energy debts they need to repay, yet there are very few measures in place to protect microbusinesses from debt and disconnection. That’s why, it’s more important than ever that suppliers follow good practice to reduce the negative impact on this group.
Our key recommendations for suppliers to support businesses in debt or at risk of disconnection are to:
- Identify debt early and act quickly
- Communicate effectively and offer support
- Work collaboratively with specialist third parties
- Offer affordable repayment plans
- Take all available steps to make contact
- Avoid high additional fees associated with disconnection and reconnection
Accurate and timely bills are important to prevent debt – if a debt does develop, acting quickly is essential. It’s worth noting that many of the energy suppliers we spoke to do try to contact customers straight away using a variety of methods.
Disconnecting a business’ energy supply should be avoided if possible as this increases the likelihood of the business failing, which ultimately makes it far harder for debts to be repaid. Where disconnection does occur, the fees for reconnecting the business should not be excessive. If the fees are excessive, and the business cannot afford to pay them, then the business may be prevented from reconnecting and continuing to function.
Most businesses that are run from home will be on a domestic contract and receiving the same protections as domestic consumers. However some microbusinesses operate in buildings with a small domestic component, like a shop with somebody living above it, and a single energy supply.
We think anyone living in a mixed-use property should have the same protections as a domestic consumer. This includes the requirement to offer affordable repayment plans and alternative payment methods where possible, as well as increased protection from disconnection. These protections are likely to prove particularly important in the coming months, as the impact of COVID-19 potentially increases the risk of disconnection for more mixed-use properties.
Problems with brokers
Every year, around one third of SME and microbusiness energy contracts are negotiated by third party intermediaries (TPIs). This includes switching sites, brokers, and energy consultants. TPIs provide a useful service, but we do see cases of poor practice, such as:
• pressuring businesses into agreeing contracts;
• providing little information about fees and who pays these, and;
• exaggeration of the broker’s market coverage.
Unlike in the case of the energy suppliers, Ofgem does not directly regulate TPIs. We have called for government to address this in the forthcoming white paper and for TPIs to take voluntary steps in advance of regulation. In the absence of regulatory protections, it is therefore crucial that suppliers work closely with their TPIs to protect customers against the risk that unscrupulous brokers take advantage of struggling businesses during the crisis.
To tackle this risk suppliers should:
• Have clear standards of conduct that TPIs must adhere to
• Put in place robust audit regimes to monitor TPI behaviour
Signposting to support can play a role
Our new report – Getting through to business – published alongside the guide, looks at whether improving communications from suppliers to customers could improve outcomes. This qualitative research found that awareness among small businesses of services such as Citizens Advice and Business Debtline, is low. However, it also showed that some businesses would be keen to make use of this help once they know it is available to them.
It’s vital, therefore, that suppliers help their customers understand where support is available by signposting information on bills and other communications. This is especially important in cases where the business owner or someone they care for is in a vulnerable circumstance, and may be more likely to benefit from support and advice as a result.
The government has stepped in with unprecedented financial support for businesses through the immediate impacts of the current crisis, to help keep as many viable companies going as possible. However, to ensure small businesses are supported with the longer term financial impacts of Covid-19 and the debts that have built up as a result, it’s essential that energy suppliers take the right steps necessary through our good practice guide to support small businesses going forward.