Bosses slam upfront energy bills

Wednesday, July 01, 2009

EXECUTIVES from Britain’s top companies will warn the Big Six utilities next week that draconian contract terms, imposed to insulate them against the failure of business clients, will lead to further job losses unless they are urgently reformed.

The Major Energy Users’ Council (MEUC), a cross-industry group that includes the likes of Tesco, Rolls-Royce, BT and the NHS, has convened a crisis meeting for Tuesday in the Guildhall to address the issue. Representatives from the Big Six and credit insurers including Coface, Atradius, and Euler Hermes are also expected to attend.

The problem developed because credit insurers, who pay the bills of companies that go under, have pulled out en masse from certain industries as business failures have piled up in the recession. The lack of cover has led energy suppliers to start demanding upfront deposits equal to up to six months of energy bills, or requiring payment of invoices in as little as five days. Some companies have been threatened with having the power cut off if they do not comply.

Our Business Development Director, Donnie Maclean had this to say - "Energy companies are asking for up to 9 months of payments in advance, as a bond, then the bills are paid as normal. The energy company keeps that money and doesn't pay interest. This is what the MEUC are reacting to".

Andrew Buckley, head of member services at MEUC, said: “This has become a huge cashflow problem, especially for small and medium-sized businesses. We need to sort this out because it is a block on Britain working.”

The problem first arose late last year as credit insurers withdrew from hard-hit industries such as construction, cars and ceramics. It has worsened in recent weeks, however, and has spread to all industries. In some cases long-term supply contracts have been torn up by the energy companies and replaced with much more onerous deals, Buckley said.

The British Ceramic Foundation has warned that jobs are at stake if energy suppliers continue to deny power or offer only harsh terms. “ One of our members received a letter demanding £280,000 within seven days if he wanted the gas and lights to stay on. This is clearly untenable,” said Buckley.

This story plus comment from Donnie Maclean was featured on The Times Website.

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