Calls for Ofgem to Investigate Extortionate Exit Fees in Hospitality Industry
Sacha Lord, the Night Time Economy Adviser for Greater Manchester, has called on Ofgem to launch an urgent investigation and support the cancellation of exit fees for small and medium businesses, as the pressures of soaring energy bills grow.
As of April 1, the Government’s energy support scheme has been significantly scaled back, a move that hospitality industry leaders have predicted will mean the closure of thousands of venues across the UK.
The British Beer and Pub Association has warned that pubs will need to increase turnover by an average of at least 11% to break even, and that even with an improved energy scheme in place, turnover needed to be 8% higher than before the energy crisis.
Lord now believes a national scandal is on the horizon with venues who locked into contracts at the peak of the energy crisis last year now being left without Government subsidy in the face of excessive unit costs.
One Greater Manchester pizzeria, Dokes, has been asked to pay a £32,000 exit fee to terminate its contract with supplier, Pozitive Energy. Originally paying 17p per unit for electricity when the restaurant was launched, contracts soared last December to 70p per unit, capped at 47p per unit through the Government’s energy cap scheme until April 1 – a subsidy which has now expired.
“As energy prices soared last year, we saw a host of providers decline to take on new contracts from the hospitality industry. This inevitably led to a black market where businesses were pressured into signing up to energy contracts far beyond their means with unscrupulous providers.
“We are now seeing these providers charging unwarranted prices for gas and electricity, and even more concerning are the extortionate exit fees being summoned as business owners now try to renegotiate terms.
“Ofgem was set up to protect consumers and improve the energy system, but they are currently doing neither. We urgently require intervention from Ofgem to investigate these providers and provide a realistic pathway for businesses who without help will undoubtedly fall into bankruptcy.”
Ofgem has been at the forefront of media scrutiny in recent months, following its failure to care for energy customers, both residential and commercial.
In February, former Prime Minister Gorden Brown, accused the regulator’s Chief Executive, Jonathan Brearley, of “dismally” failing to protect vulnerable customers after it was revealed that hundreds of thousands of customers were forced to switch to costly prepayment meters, pushing some of them into the hands of illegal moneylenders.