New rules intended to simplify electricity and gas contracts for businesses have created confusion and a ‘spaghetti junction of red tape’, according to business price comparison service Make It Cheaper.
From today (18.1.10) – following a two year investigation by Ofgem – two million businesses should be benefitting from greater consumer protection in relation to their electricity and gas contracts. However not only does each supplier have a different ‘interpretation’ of the new rules but they only have to apply them to business energy contracts entered into from today. Whilst one of the Big 6 suppliers has indicated that it will apply the rules retrospectively on all existing contracts, this still, leaves the vast majority of business energy customers at the mercy of their existing terms and conditions.
Business energy suppliers each have different T&Cs that can run to over 10,000 words in length and only allow customers to serve notice in narrow renewal windows that quietly open and close with months left to run on the contract. Anyone missing the renewal window is automatically denied the right to switch to the cheapest electricity supplier for at least another year. Our research shows that this ‘rollover’ technique catches out over 80% of businesses and is commonly used by energy suppliers to lock customers into much higher rates than those available to new customers/switchers.
A further area of confusion is the size of business to which the new rules are restricted, should they wish to compare electricity prices. Ofgem uses the description ‘microbusiness’ but then offers several definitions. These include: businesses employing fewer than ten people, with an annual turnover of less than 2 million euros, or energy use of less than 200,000 kWh of gas a year or 55,000 kWh of electricity a year. Again, some suppliers are rigidly applying these definitions whilst others will consider SMEs of all shapes and sizes as qualifying for the new rules.
Jonathan Elliott, managing director of Make It Cheaper, commented: “As a price comparison and switching service specifically for businesses, it is our job to understand the market inside out and make sure that our customers are eligible for the prices we quote from the 11,000 tariffs we have in our system. We are getting very mixed responses from suppliers, many of whom are still trying to fathom out the new rules themselves. It would be so much simpler if, rather than just guidelines, these new rules were set out more clearly and more strictly imposed.”
Business electricity prices currently range threefold from around 7p/kWh to 21p/kWh and 2p/kWh to 6p/kWh for business gas prices but anyone looking to stay on the lowest prices has to be prepared to switch regularly. For a free and independent downloadable guide to finding the cheapest electricity suplpiers for your business see http://www.makeitcheaper.com/media/13832212/mic-printable-gu… – or register for Make It Cheaper’s ‘Business Energy Contract Checking Service’ by calling 0800 970 0077. One quick phone call is all it takes to take advantage of this free, no-obligation service, which will tell you earliest switching dates and the cheapest gas prices or cheapest electricity prices available.