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Business energy contracts are the subject of much confusion and debate. While there have been improvements in transparency, the practice of ‘rollover’ continues.
Business energy users are still being automatically passed onto a new contract without their approval. Worse still, businesses don’t have as long to terminate a contract as they once did: gone from a maximum of 90 days to just 30. But even those that avoid rollover could unnecessarily be paying 80% more for their energy.
While the consumer energy market has benefitted from intervention from the government and pressure groups, the business energy market has had less attention. Longer fixed-term contracts and more pressing priorities means that the windows to compare and switch business energy suppliers all too often missed by small companies.
While most of the ‘big six’ energy suppliers have ended roll-over contracts, the practice still continues. Failing to tell your supplier of your intention to end a contract before the notice period, can mean that you are rolled over onto a new contract. The main difference is that suppliers are now only allowed to rollover a contract for a maximum period of one year.
But small businesses should not assume that escaping rollover gives them the best deal. In fact, the opposite is usually true.
What happens when your fixed-term business energy contract ends but you are not rolled onto another one? Instead of cutting supplies, an energy provider will tend to put customers on deemed contract. These do not have restrictive long fixed terms but the tariffs are a much higher premium than standard rates – Ofgem says that deemed contracts cost an average of 80% more than rates charged in a negotiated contract. According to Ofgem, around 10% of micro-businesses are on deemed contracts. (The definition of ‘micro business’ is important: this applies if you have fewer than 10 employee, turn over less than €2 million, or use 100,000 kWh of electricity or 293,000 kWh of gas per year.)
In one sense, many business energy users are actually worse off by not being rolled over, unless they take the time to compare and switch energy supplier.
But other priorities come first – recent research by SwitchMyBusiness.com revealed that: more than 30% of small businesses have been shunted onto a deemed contract and 18% have been ‘locked-in’ to a fixed-term contract without their permission. This stems from the fact that over half of smaller business do not understand their energy contract.
It goes without saying that deemed contracts are to be avoided if possible. But for those unavoidably on deemed contracts in the short term, there are some considerations:
As Ofgem explains, the suppliers of businesses on energy deemed contracts must:
If you are on a deemed contract, energy suppliers cannot:
While these are the most important points, Ofgem has a longer document outlining your full rights.
For those at risk of rolling onto another fixed-term or deemed contract the situation has recently improved: Ofgem now requires suppliers to put the end date and notice period on all bills for fixed-term contracts. Small businesses may not be aware that they are allowed to tell a supplier that they want to switch at the end of their deal at any time before the notice period.
Changes introduced by Ofgem on 30 April 2015 require suppliers to:
Still there are some simple ways to ensure you get the best deal.
Better energy deals are within the reach of thousands of UK businesses. But the substantial investment of time needed to find them cannot be justified for many of the UK’s hard-pressed SMEs. SwitchMyBusiness.com has already helped thousands of small to medium sized businesses save money on energy but, most importantly, we contact you when your renewal is due with a no-fuss comparison when so you never need to worry about auto renewal or deemed contracts.
Simply complete the form on the top right of this page or call 0330 0100 251. Our expert team are ready to answer any questions you might have.
Very helpful & straight forward
"Ian Howell was excellent, help me find a good deal and the process was very smoth."This review was posted by Sam on the 17th of October 2017
Nicole Borneuf contacted me by e mail
"Nicole Borneuf contacted me by e mail. Didn't keep bothering me. Happy to recommend"This review was posted by Mr Gareth Wigdahl on the 16th of October 2017
Good clear advice and saved me money …
"Good clear advice and saved me money without any pressure thanks Bhavni"This review was posted by Sam Weston on the 16th of October 2017
Excellent advice from Ian
"Excellent advice from Ian"This review was posted by Steve Tunnicliffe on the 13th of October 2017
Switching Suppliers can be really …
"Switching Suppliers can be really stressful, but luckily Bhavni was assigned to me. She really helped break everything down and made everything simple. Amazing member of staff for Switchmybusiness.com Due to Her helpfulness I will be returning to switchmybusiness.com again in the future."This review was posted by Dean on the 12th of October 2017