When chef and restaurant owner Michael Clay was told he would have to pay £32,000 to exit an energy contract he signed up for last December, he couldn’t believe what he was hearing. Michael owns the small pizzeria Dokes in Prestwich.
It was founded on using local ingredients instead of imported stuff that’s flown miles around world to get here, when we have some of the best produce right here on our doorstep. But like all hospitality businesses in the city, he’s being hammered on all sides by huge increases in all of his costs.
Most pressing of all is energy. When he opened the restaurant last year, he was paying 17p per unit for his electricity. His contract with Colchester-based Pozitive Energy came up for renewal in December last year, at the peak of the energy crisis, at which point he faced a choice; closing down or agreeing to a staggering increase - 70p per unit, in a contract to last 12 months.
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He and his business partner, Wesley Downham, who also own the Elnecot bistro in Ancoats, did what they had to do to keep the business running, so they agreed. The government’s energy cap scheme capped that 70p cost per unit at 47p per unit, until April 1. But that’s about to run out.
Pozitive Energy now offers a tariff at 29p. He asked them to be reasonable, and let him cancel his 70p contract, and join its new 29p tariff instead, and said he was happy to pay a penalty charge to do so if necessary.
He was initially quoted £319.49p as the ‘early termination penalty’. The following day, the company got back in touch, having recalculated the penalty fee. It was now £32,000.
“A lot of people’s contracts ran out at the end of last year when prices were absolutely through the roof,” he told the Manchester Evening News. “So you were left with the dilemma of not being able to open, because you didn’t have an electricity contract, or taking a contract at an outrageous amount.
“With the government cap, we were already paying three times more than we were paying before. We’ve barely been able to keep up with that, and come Saturday, we’ll be paying five times more than when we opened. It’s over 10% of our turnover. That’s unsustainable. It’s crazy.
“The real killer is we know there are now contracts at 29p a unit. The prices have come right down. We’ve been trying to have a reasonable conversation with the energy company. We’re saying ‘we can either close down, or go onto a reasonable contract with you’.”
When Pozitive came back with the penalty charge of £33,000, he was staggered.
“I asked ‘how on earth have you come up with that figure?’ And we haven’t really had a solid response to that,” he went on. Wesley added that they signed the contract with Pozitive 'out of desperation', and called the 70p rate they had to agree to 'extortionate', given that prices have now dropped again.
Michael went on: “There must be so many other businesses out there like us. It’s been tough enough with the cap. We were waiting to see what would happen in the budget. We were like ‘there must be something’. It wasn’t even mentioned. I can’t get my head around how this has all been glossed over.
“If we don’t manage to sort something… it’s simple maths now for us, if you go a few months down the line and we’ve had £6500 bills for electricity every month. It’s gone from two to three percent of our turnover to something like 12%.”
Manchester’s night time economy advisor Sacha Lord has now called for the resignation of Jonathan Brearley, CEO of regulatory body Ofgem in light of the behaviour of the energy companies.
“For months now, we have witnessed the big energy firms posting their highest profits on record,” he said in a statement to the MEN. “At the same time, Hospitality operators, not just in Greater Manchester, but across the whole of the UK, felt pressured into signing long term contracts which locked them in, in order to benefit from the Government Support.
“Ofgem are a body set up to protect the consumer. They have been repeatedly warned both what was happening and also the cliff edge that is coming this Friday, on their watch. To say they have been useless would be an understatement.
“I know of many operators who are now having to reduce hours or even close, due to untenable energy bills. This was on Ofgems watch. On their watch, businesses are closing and people are losing their jobs.
“Ofgem not only needs reviewing, but I’m left with no other option but to call for the CEO, Jonathan Brearley to step down from his £300,000 a year job.”
In a statement to the M.E.N, Ofgem said: “Ofgem is committed to working with consumer groups, energy suppliers and Government to ensure all consumers, both domestic and non-domestic, are protected.
“We have received reports that business consumers are not being treated fairly in some circumstances and we take these concerns very seriously. We are investigating the reports and are taking action to ensure suppliers comply with our rules.
“We’ve also made a call for input on the state of the non-domestic energy retail market to help us identify the main challenges currently being faced by both consumers and suppliers in this area. We expect suppliers to treat their customers fairly and to actively talk to those who believe they may struggle to pay their bills to discuss options and together find common sense solutions before consumers fall into debt.”
The Manchester Evening News has contacted Pozitive Energy for comment, but is yet to receive a response.
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