New rules to help businesses compare prices
31 Jul 2014 01:01 PM
Ofgem is proposing new rules to give further help to Britain’s smallest businesses – around 1.6 million customers - when they are shopping around for energy deals
The rules will require suppliers to make price comparisons easier by including the price of the customer’s current deal, as well the new rates that their supplier will charge after the end of the current contract.
Suppliers must also tell each business how much energy it uses annually, so that they have all the information they need to compare their supplier’s prices with the rest of the market. This puts customers in the best possible position for negotiating a new deal when their current contract ends.
And all suppliers will have to use a standard 30 day notice period, so businesses know when to tell their supplier that they want to switch.
Suppliers will also have to acknowledge all notices given by businesses to say they want to terminate their contract when their deal ends, within five working days of receipt.
Ofgem has published a statutory consultation on the expected legal wording of the rules. This is the final opportunity for stakeholders to comment on the changes. Ofgem will publish its final decision this autumn. Subject to the outcome of the consultation and provided there are no appeals by the industry to the Competition and Markets Authority, the 30 day notice period and requirements for acknowledging termination notices are expected to apply from 31 Dec 2014. We expect that the rules on price comparison and consumption will come into force in March 2015.
Ofgem has already brought in tough standards of conduct so businesses get fairer treatment from their supplier, or risk facing fines. Since March 2014 around 160,000 more small businesses have benefitted from Ofgem’s rules for supply to business, which ensures they get clearer information on their contracts. All bills for the smallest business also now have to show the contract end date, so customers are prompted to think about comparing the market. We will publish additional guidance for small businesses to help them manage the process of contract renewal.
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Notes to editors
1. Automatic rollover of contracts
View the statutory consultation on non-domestic automatic rollovers and contract renewals.
Auto-renewed contracts are less a feature of the market since the big six suppliers voluntarily stopped automatic roll over of fixed term contracts with termination fees if businesses decide to leave before the deal expires.
As a result we estimate that 1% of the 1.6 million smallest British businesses will be on automatic rollover contracts in the future. This is because they are still being used by independent suppliers to help them manage their wholesale energy costs.
Our rules already limit automatic rollover of contracts to a maximum of one year. We have not ruled out banning them altogether and we are considering whether this is proportionate and in customers’ interest. Our research found that of the customers that have had contracts automatically rolled over, 86 per cent were satisfied with that process. Furthermore, a ban could increase costs for businesses as more of them would be put onto ‘out of contract rates’ or ‘deemed rates’ which are on average 80 per cent more than rates charged in a negotiated contract.
However, we have concerns about the difference between the rates charged by some independent suppliers for automatic renewals, and the rates charged where customers contact them to discuss the renewal of their contract. This practice may be unfairly penalising customers who do not actively engage with their supplier at contract renewal.
We are gathering further evidence including on suppliers’ pricing practice and will reconsider the case for the ban in six months’ time.
Our key message for consumers is clear: by comparing deals and negotiating your energy contract, you can make significant savings.
2. About Ofgem
Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.
For further press information contact:
Kate Wilcox: 0207 901 7113
Lisa O’Brien: 020 7901 7426
Dafydd Wyn: 020 3263 9943
Out of hours media contact number: 07766 511470
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