The Energy Advice Line has welcomed plans by Ofgem to fine Britain’s biggest energy companies if they fail to trade power with smaller rival companies.

Julian Morgan, managing director of the UK’s leading business energy price comparison, switching and advice service for energy users, said increased competition in the energy market was urgently needed to help put the brake on spiraling gas and electricity prices.

Ofgem announced last week it would force power companies to publish the prices they were prepared to buy and sell energy two years ahead. They would not be allowed to refuse “reasonable” requests from small suppliers that wanted to buy power from them.

Ofgem would also have the power to penalize those companies that did not trade fairly.

“These initiatives by Ofgem are certainly a step in the right direction and they are long overdue,” Mr Morgan said. “At the moment, consumers are not feeling the benefits of a competitive energy market because the market is not truly competitive.

“The Big Six energy companies both generate and supply power, and smaller independent suppliers feel blocked out of the market. It isn’t a level playing field.

“But for these reforms to be effective, Ofgem needs to ensure that the penalties for non-compliance are significant enough to act as a deterrent. The Big Six are very large and financially powerful organisations.“

Mr Morgan said the regulator also needed to create incentives to encourage smaller energy suppliers to enter the market by easing onerous regulatory and financial requirements that were beyond the scope of small players.

“Many smaller companies that would like to enter the energy supply market simply don’t have the financial resources to make a bid,” Mr Morgan said. “At the moment, the Big Six hold all the cards.”

He agreed with the analysis of some smaller suppliers that the reforms would not address other significant obstacles to smaller players entering the market.

“I think a more radical overhaul of the wholesale market is in order if Ofgem and the government are serious about eliminating the so-called ‘stranglehold’ the Big Six have on the market.”

The Energy Advice Line is a leading impartial electricity price comparison and switching service for businesses and domestic energy users. It actively campaigns for reform of the UK’s energy market to give all consumers a fairer deal and cheaper prices from the major suppliers.

It also offers a free and independent price comparison and switching service that enables consumers to shop the market and identify the cheapest available deal with a few computer clicks.

The Energy Advice Line has backed a campaign by a Coventry MP and retailers aimed at stopping energy suppliers from hitting struggling small shops and other business electricity users with huge back bills.

Under current laws, suppliers can reissue firms with higher bills to cover billing errors going back up to six years – even when the mistakes were the fault of the supplier.

Labour MP Jim Cunningham has supported the Association of Convenience Stores’ (ACS) fight to limit back billing to one year in line with rules that apply to domestic customers.

Julian Morgan, managing director of the Energy Advice Line, the UK’s leading business electricity price comparison and switching service, agreed that Ofgem needed to act urgently to give business energy users a better deal.

“We’ve long been calling for Ofgem to do something about back billing,” Mr Morgan said.

“This has been a nightmare for many businesses that suddenly find themselves in debt and their energy supply hastily disconnected, through no fault of their own.

“Furthermore, these outstanding back bills have made it more difficult for these firms to switch suppliers and reduce their energy costs.

“There has been a distinct lack of sympathy for these businesses, which is unreasonable given that in many cases, the supplier has made the billing error.

“Suppliers have made a move in the right direction but again Ofgem needs to make them do better. A one year limit on back billing is appropriate for all firms and will save them no end of pain.”

Research by the ACS found that 36% of independent retailers across the UK had been overcharged for energy in the past year, while more than one-in-four had received backdated bills that left them struggling to stay afloat.

“Energy companies continue to take advantage of small businesses at a time when energy costs are spiralling and competition in the market is failing to work effectively,” Mr Cunningham said.

“I am pleased to support ACS’s campaign and I have personally written to Ofgem calling on them to take immediate action.”

Late last year, energy suppliers developed a set of draft Standards that proposed reducing back billing to three years instead of six for the smallest businesses.

However, Ofgem warned that the proposals were insufficiently robust and suggested one year was more appropriate, particularly where the supplier was at fault. It also said the limit should apply to all business electricity users, not just the smallest firms.

A report by consumer watchdog Consumer Focus found that in 2010, 40% of all business energy cases handled by the Government’s advice line Consumer Direct related to back billing. In some instances, businesses faced back bills of £60,000, and if they were not in a position to pay quickly they faced disconnection.

The Energy Advice Line is the UK’s leading business electricity price comparison and switching services for business, and enables firms to compare the market for the best possible business energy deals at the touch of a button.

The service is not just about saving customer’s money year on year. We always act with complete transparency, present the best price first time and are on hand to help customers understand their bills at any stage of the contract with our free Contract Management Care Service. For further information visit www.energyadviceline.org.uk