AS ENERGY company EDF becomes the latest to increase its prices, the energy regulator says it will be looking at ways to protect small businesses from getting tied into confusing contracts.
Ofgem says 150,000 small businesses could be given increased protection with penalties for suppliers if they fail to meet adequate standards of service.
The proposals were welcomed by business leaders, who say the changes could be a “shot in the arm” to help companies get a fairer deal.
Andrew Wright, Ofgem senior partner, markets, said: “Our retail market review showed that small businesses want fairer treatment from suppliers, clearer information about contracts, and more protection from misselling. Our proposed reforms seek to address these issues. We urge suppliers to show they are committed to restoring the confidence of business consumers by getting behind our proposals.”
Currently, Ofgem safeguards on small businesses only apply to those which employ up to ten people and which have bills of around £5,000 a year. The extension of the scheme would cover bigger businesses facing £10,000-a-year bills.
The scheme would ensure energy companies were clear about the length of contract businesses had signed up for and would make it easier for small businesses to shop around and find a better deal. Energy companies would have to give notice 60 days before a contract was due to end and could be fined for not letting businesses know their contract was about to end.
Jonathan Elliott, of Makeitcheaper.com, said: “Ofgem’s backing of contract end dates and notice periods on bills is a big win for small businesses. It makes the whole renewal process a lot more transparent and means far fewer will fall into the controversial rollover trap. In a survey of 1,250 businesses we conducted earlier this year, 96 per cent told us it would be easier to manage their energy accounts if contract end dates appeared on their bills.
“Knowing when your contract comes to an end – and therefore avoiding pricey rollover rates – basically means the difference between paying 15p and 10p a unit for electricity. For any business to take a third off its energy bill and put it straight back on the bottom line is a welcome shot in the arm.
“However, Ofgem’s proposals won’t become compulsory until at least this time next year, so we will continue with our campaign to get suppliers to commit to these changes voluntarily. Business customers of CNG and E.ON, for example, are already benefiting from seeing their contract end dates printed on their bills and we expect to see other suppliers following suit long before they are required to do so by law.”
Julian Morgan, managing director of Energy Advice Line, said: “We have long been calling on Ofgem to force suppliers to offer businesses their best prices when fixed-term contracts come up for renewal, because under current arrangements they often do the exact opposite. It is common practice for suppliers to automatically roll over unwitting businesses onto very expensive out-of-contract tariffs when their fixed-term contracts expire, and these tariffs can be 50 per cent more, or even higher, than their cheapest deal.”