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April 03, 2014

New billing rules could reduce SME energy costs

New billing rules could reduce SME energy costsOfgem has brought in new rules that will make it easier for small businesses to negotiate the rates they pay for energy. It could lead to annual savings in excess of £1 billion, according to Make It Cheaper.

Energy companies are now required to display contract end dates on the bills they send to small business customers, and to highlight the cut-off date for switching supplier or negotiating new rates.

Cut-off dates can fall between 30 and 90 days before a contract comes to an end. According to Ofgem, the average small business spends between £3,500 and £6,500 annually on gas and electricity. But, says Make It Cheaper, this amount is driven more by the rates they pay rather than their own consumption of energy and it says a quarter of businesses have been trapped in a cycle of expensive rates because they have missed the renewal date.

Ofgem is also extending its micro-business protections to cover larger firms – they now include those that spend up to £10,000 a year on either gas or electricity, double the previous amount. As well as clearer bills, the new protections mean qualifying businesses can only be automatically "rolled into" a new contract for a maximum of one year in the event of failing to contact their supplier before the cut-off date.

Ofgem said: "We are putting in place new rules to help smaller businesses avoid being caught out when their fixed term contracts come to an end. Suppliers will have to show clearly, on every bill or statement, the date that the contract will end and the deadline for the customer to give notice to terminate a contract and change supplier. We also proposed that micro-business consumers should be allowed to give notification that they wish to terminate a contract at the end of the fixed term, any time during their contract."

Research by Make It Cheaper in 2011 showed that 96% of business owners said it would be easier to manage their energy contracts if contract end dates were printed on bills. It predicts that clearer bills could save businesses more than £1 billion.

Jonathan Elliott, founder and CEO of Make It Cheaper, said: "Suppliers are obviously not that keen to draw attention to key contract dates because it encourages their customers to, quite rightly, shop around. These new rules put the 'notice' back into a notice period and put the power back in the hands of customers to settle on a deal that's right for them."

This week EON announced it would be ending rollover contracts for SME customers. John Allan, national chairman of the Federation of Small Businesses (FSB), said: "Rollover contracts have been hurting small businesses for too long so ending this practice can't come soon enough. Even with this welcome step, the energy industry remains in drastic need of reform."

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