Ofgem Remedies For Business Electricity… So Far, So What? By Mr Jonathan Elliott At Isnare.com Ezine Articles

Eighteen months ago Ofgem - the energy industry regulator - launched its supply ‘Probe’, an investigation into the markets for electricity and gas supply. Top of the agenda for small businesses was rollover contracts (which automatically renew without a signature). You may have heard these also being referred to as ‘assumptive renewal’ or the slightly misleading ‘evergreen’ contracts (absolutely nothing to do with being green but all the emphasis on being for ‘ever’!).

Unlike household energy contracts, nearly all gas and electricity for business contracts are evergreen, meaning they automatically renew themselves if you don't terminate them with a letter of notice. Some business electricity and gas suppliers renew more than 90% of their customers in this way, rolling them over on to new not-so cheap energy prices when often the customer is unaware this is happening.

The core issue is not the existence of rollover contracts but the way in which Ofgem has allowed the business electricity suppliers to use them. Some business electricity providers take advantage of a lack of awareness among small businesses about how the contracts work, disguise the renewal reminder as junk mail and all have different rules for serving notice.

However this and the other the issues affecting the way small businesses buy their commercial energy have been around for a long time. Newspapers such as the Daily Telegraph and the Mail on Sunday have been reporting the issues and even campaigning on behalf of business consumers for years. We too have been campaigning since year dot – which for us was early in 2007. In September of that year we co-hosted a 'rollover roundtable' with Mark Prisk MP, the Shadow Business Minster and was attended by all the ‘Big 6’ business electricity providers, energywatch (the watchdog now absorbed into Consumer Focus), the Federation of Small Businesses and Philip Davies, a director of Ofgem. Davies summed up the dilemma facing SME energy customers at the meeting by saying: “Some businesses are getting a good deal and others are not. Being a passive customer means that, as the years go by, you are much less likely to get a better deal than an active customer.”

The roundtable meeting coincided with the results of a customer satisfaction survey of over 2,400 small firms, revealing that none of the Big 6 business electricity providers even reach a ‘satisfied’ rating for. It was concluded that the following recommendations should be adopted and accelerated by Ofgem:

• Clear access to business electricity prices (as in domestic market)
• Code of conduct for all business electricity price comparison intermediaries
• Commercial electricity contract terms to be fairer, more consistent and less ambiguous
• Challenge current rules to close certain loopholes which deliberately complicate the process of switching to retain
customers.

So the Probe was launched the following February (2008) and, between then and now, there have been a series of announcements and periods of consulting from the Regulator. The changes, which Ofgem proposes, are due to come into force on 1st January 2010 but, in our opinion they do not go far enough. Furthermore in Ofgem’s own words, the changes “…would not entirely eliminate the risk of potential consumer detriment as a result of the automatic contract rollover.” We also think the proposed changes are in danger of creating more confusion in the market because they:

• Fail to properly address rollover contracts
• Waste a rare and perfect opportunity to standardise all the suppliers’ Terms & Conditions
• Do not apply retrospectively so will only relate to business contracts fixed from 2010

If the contract terms relating to the renewal process were simplified, standardised across all suppliers and applied to every existing contract, businesses would at least have a much better chance of knowing where they stood when confronting their business electricity costs. Anyone can write to Ofgem to lobby for this to happen and, indeed, we have been encouraging small businesses and their representatives to do so. It takes more than one voice to represent an industry but thankfully we are not alone in thinking this.

Published At: Isnare Free Articles Directory http://www.isnare.com
Permanent Link: http://www.isnare.com/?aid=423593&ca=Business

Important Notice DISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.