Latest on business energy contracts

What's the burning issue in today's business energy market?

Apart from high prices, top of the agenda for business energy are rollover contracts. These are also known as 'assumptive renewal' or the slightly misleading 'evergreen' contracts (in that they last for ever but have absolutely nothing to do with being green!). Unlike household contracts, nearly all business energy contracts are designed to be rolled over, meaning suppliers automatically renew them when they come to an end if they haven't been terminated with a letter of notice.

Why is this type of contract unpopular?

Some suppliers renew more than 90% of their business energy customers by rolling their contracts, often unbeknown to them, and using it as an opportunity to increase (and lock-in for at least another year) the prices they charge. Those that try to switch on to better rates usually find out too late that they've already been rolled because the termination window has passed. Currently all business energy suppliers have different rules for termination - some requiring you to write a letter three months in advance the contract actually expiring.

What is being done about it?

At the start of 2008 Ofgem - which regulates the business energy industry - launched its supply 'Probe', an investigation into the business energy markets. The resulting changes to the rules are due to come into force in 2010 but disappointingly they do not include an outright ban on rollover contracts. 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."

So what are new rules for business energy contracts?

You will be free to terminate business electricity contracts entered into after 18^th January 2010 by sending a termination letter at any point up until 30 days before it expires. You cannot be cut-off for doing this and it is still the only way you to guarantee you are not rolled into an expensive contract. In other words, it protects your right to switch at the end of the contract and may even help you negotiate a new contract with the same supplier at a much more competitive rate than their proposed renewal offer.

What if your contract started before this date?

Sadly, the changes do not apply retrospectively so the old rollover rules still apply to all current contracts and will take years to completely phase out.

Confused? What should you do?

Philip Davies, a director of Ofgem, once summed up the dilemma facing business energy customers: "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." So be active! Use our Switching Tools to avoid the rollover trap or, better still, call our helpline and we'll find out when your business energy contract ends so that we can give you a timely reminder along with the most competitive rates in market.