Switching Swizz for Business Energy Users

Businesses thinking of switching energy suppliers to reduce their bills should check their contracts for hidden and complex notice periods.

Our estimate is that as many as two-thirds of would-be switchers suffer setbacks because they are unaware of contractual obligations they have with their existing supplier. Business customers do not always realise they must actively reject their supplier's renewal offers mid-way-through their contract to avoid being tied into higher prices for a further 12 to 24 months. Each supplier has a different set of terms and conditions (of up to 9,000 words) but the termination ‘window’ can be as narrow a week and is activated as soon as the renewal letter is sent. In some cases this is as many as 120 days before the contract is due to expire and so is too early for the customer to shop around for better prices.

The lowest tariff currently available to a new customer shopping around is around 8p/unit, compared to the highest default tariff for a ‘loyal’ customer staying with a supplier of around 16p/unit. For a small office or shop, typically using 25,000 units a year, the annual difference would be more than £2,000. The variables that determine what rates each business is eligible for include: postcode, business type (sole trader, Ltd etc), sector (retail, manufacturing etc), annual consumption (average for an SME is 25,000 kWh/year), meter profile (the first two digits in a meter reference number range from 00-08 which is a classification related to consumption - most SMEs are 03/04 profile), payment terms (direct debit being best) and their credit rating.

With such a wide range in tariffs, it's no surprise that people are itching to switch. Most people don't wake up to this until they start paying higher rates and sadly, by the time they notice their payments increasing, they have already been rolled into a new contract that they are stuck with for a further 12 or even 24 months.

We advise businesses to make a diary note of utility renewal dates, rather than relying on suppliers to alert them, and always serve the necessary notice beforehand. This leaves all options open to shop around at the end of the contract term and avoids being automatically locked into renewal contracts on higher rates.

For example, St Michael’s is a Church of England church, next to the Town Hall in the old Marketplace of Macclesfield and – as far as the utility companies are concerned – a business. As the head church in a group of four in the Macclesfield Team Parish – with its welcome area, meeting rooms and kitchen facilities – remains open to the public throughout the week. Volunteer treasurer, David Smith, is an accountant by profession and has been looking after St Michael’s coffers for 13 years. His role is to keep overheads in check and his portfolio of responsibility includes water, Borough Council rent, rates, gas and electricity. Initially David signed into utility contracts with the help of an agent approved by the Diocese of Chester. However he discovered the hard way that the agent was not well enough informed to prevent St Michael’s from being tied-in to paying uncompetitive rates with incumbent suppliers when the contracts came up for renewal. Taking matters into his own hands David began by approaching a number of gas and electricity suppliers directly for quotes but then found a broker that could do all the legwork for him. At David’s request, Make It Cheaper handled the switches (free of charge) for both the gas and electricity and will now be responsible for making sure that St Michael’s is not rolled over on to higher rates in future. As such, the church stands to save in the region of £2,000 over the next 12 months. Once a year, in April, David reports back to the Diocese at the Macclesfield Team Parish AGM and will be telling other church treasurers that there’s no such thing as customer loyalty with energy suppliers and, by staying with the same company from one year to the next, they too will be automatically rolled on to more expensive tariffs.

For those in any doubt or just looking for an easy solution, Make It Cheaper offers a service which logs your renewal dates and, during the notice window, will contact you to recommend the best available rates in the market. If requested, Make It Cheaper will then serve notice on your behalf and arrange new contracts, making sure you are not rolled onto expensive rates further down the line. This service costs nothing to use.