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Business energy contract rollover: the facts


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.

Auto-renewal rollover contracts

What are rollover contracts?

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.

When and why are contracts rolled over?

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.

Deemed contracts

What is a deemed contract?

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:

Deemed contract rights

As Ofgem explains, the suppliers of businesses on energy deemed contracts must:

  • take “all reasonable steps” to provide you with information including the charges or fees
  • provide you with a copy of the full contract if you ask for it
  • take “all reasonable steps” to tell you about other available contracts
  • take “all reasonable steps” to ensure that the terms of the contract are not “unduly onerous”.

If you are on a deemed contract, energy suppliers cannot:

  • prevent you from switching to another supplier, for any reason or at any time, (i.e. they cannot object to you transferring for reasons of debt or contract)
  • require you to give notice before terminating the contract or charge you a termination fee.

While these are the most important points, Ofgem has a longer document outlining your full rights.

Getting the best business energy deal

What has changed?

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:

  • allow micro-business consumers to give notice to terminate a contract no more than 30 days before a contract ends
  • provide current prices and annual consumption details on renewal letters for micro-business fixed-term contracts
  • acknowledge a termination notice from a micro-business consumer within five working days of receipt, or as soon as reasonably practical after that

Still there are some simple ways to ensure you get the best deal.

How to get the best business energy 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.

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