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Credit scoring drives up firms' energy bills
Monday, June 15, 2009
Thousands of small firms are facing higher energy bills because suppliers are increasingly using credit scores to filter out less profitable business customers and those they perceive as risky.
Experts warn that despite the near halving of wholesale energy prices in the past year, many small business customers are seeing rates rise while others may struggle even to find a supplier prepared to take them on.
Donnie Maclean, of Glasgow based Business Cost Consultants, says suppliers are 'managing risks away' and cherry-picking customers.
"Suppliers have always used credit scoring to assess risk, but the process has become more intense and finding a good energy deal is becoming ever harder for firms in sectors such as retail," he says.
"In some cases suppliers are telling firms they don't want to renew their contract and giving them only three months' notice."
In other cases, suppliers are moving firms on to 'deemed' rates, which is what they charge when businesses are out of their contracts. These can be two to three times higher than contract rates.
"If a business has a weak credit record they may be forced to accept much higher rates, though whether they can afford them is another issue," says Maclean.
According to price comparison service makeitcheaper.com, a third of small businesses are unable to access the most competitive rates for business gas and business electricity because their credit score is considered too poor.
And even those with a good score may be affected as suppliers move away from businesses towards more profitable domestic customers, who pay higher rates.
Jane Stenning, 35, runs family business Hobby Ceramicraft in Hook, Hampshire, with her brother Matthew Sheppard, 33. The firm supplies kilns, glazes, clay and other materials to potteries and runs business workshops.
Keen to keep costs down, Jane contacted their supplier Eon only to be told that they were locked into its high-rate contract. Aware that prices had fallen substantially, Jane tried to negotiate a better deal, but with no luck.
She says: "As a long-standing customer I thought we would be rewarded for our loyalty, but Eon was not interested in helping me."
This article was featured on the Financial Mail's website ThisisMoney.co.uk
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