News

January 22, 2010

Small firms given more protection against energy suppliers

Small businesses which take out or renew energy contracts after 18 January are less likely to have their contracts automatically rolled over without their consent, following the introduction of new rules from energy regulator Ofgem.

The new regulations apply to firms with fewer than ten employees, a turnover of less than €2 million or energy use of less than 55,000 kWh of electricity a year.

Under the new laws, energy providers are obliged to inform businesses of their terms and conditions before they sign the contract, and provide them with hard copies of the terms written in plain English within ten days of a contract being agreed. They must also give businesses notice that their contract is due to end so that they have chance to change suppliers if they wish.

The legislation change follows a long running campaign by business groups for energy suppliers to provide businesses with the same level of service as they provide to domestic customers. Business organisations said that firms were open to exploitation by energy suppliers due to a lack of transparency.

The Federation of Small Businesses chairman, John Wright, said the new rules would give businesses more freedom to switch suppliers. "The new rules which have come into force this week give small businesses better protection when choosing an energy supplier," he said.

"In a recent survey of FSB members, 24 per cent said that they had difficulty switching suppliers," added Wright. "Ofgem must ensure that the new rules are adhered to by energy suppliers and that businesses are sent details of renewal terms before existing contracts are rolled-over, and customers tied in."

Price comparison service uSwitchforbusiness spokesman, Jake Ridge, said that the changes did not go far enough.

"Ofgem is doing the right thing in offering firms greater protection in the energy market," he said. "However, these new rules have fallen far short of the simple blanket ban on rollover contracts that was initially proposed and, as a result, are in danger of confusing busy small-business owners."

Under the new rules energy suppliers must contact business customers "approximately 60 days, and no more than 120 days", before the end of their fixed-term contract reminding them of the renewal terms and conditions.

The business then has 30 days from that date to contact the supplier if they want to negotiate a new deal so that the contract won't automatically roll over in the future, or switch suppliers and end the contract. If the business does not contact its supplier within the 30 days, the contract can still be automatically rolled over for a maximum of 12 months.

• To download a factsheet containing guidance on the new rules, visit the Ofgem website