Huffpost UK uk
Charlie Thomas Headshot

UK Businesses Lose Thousands Through Automatically Rolling Over Energy Contracts

Posted: Updated:
BILLS
SMEs are being encouraged to check with their energy contracts are due to expire | Alamy

British businesses are missing out on falling electricity rates because energy suppliers are rolling over their contracts, a survey has found.

Statistics published by the Energy Forecaster showed company owners could be missing out on 61% of energy savings by not renegotiating their energy rates at the end of their contracts.

Energy Forecaster is owned by uSwitch-owned business energy comparison arm Business Juice.

Ashton Berkhauer, director at uSwitchforBusiness.com, told the Huffington Post UK that electricity rates had dropped by an average of 4% since October 2011, but the saving wasn't being passed on to customers who rollover into a new contract.

"The average annual energy bill for a typical business energy contract negotiated in September 2012 is £2,600, whereas the average annual bill for a customer rolled over by their supplier in September 2012 is £4,200," he said.

“Businesses need to start actively engaging in the business energy market. By simply taking note of their contract end they can ensure they’re not stung by a costly rollover.

energy bills

Energy bills could be costing businesses up to 61% more if they don't compare suppliers

Energy Forecaster quizzed 500 SMEs and found nearly half of medium sized businesses and 25% of microbusinesses had been rolled over into a new contract by their energy supplier, with another 1 in 6 businesses (15%) not even knowing whether they’ve been rolled over.

Other key statistics included:

  • 19% of businesses were not aware they were at risk of being rolled over because they did not receive any correspondence from their energy supplier
  • 68% of all businesses feel rollover contracts are unfair
  • 83% of all businesses would prefer to give their consent for their energy contract to be rolled over (rising to 87% for microbusinesses)
  • 85% of businesses think government should force energy suppliers to be more transparent by printing contract end dates on bills
  • And 81% of businesses think the government should enable businesses to change energy supplier at the end of the agreed contract term without termination windows
  • More than half of businesses (55%) think that the government should ban rollover contracts

Kate Rose, energy expert at Confused.com, echoed Berkhauer's comments and told Huff Post UK any business which had recently moved premises, was a new startup or had a contract of more than a year old could save money by comparing suppliers.

"Most business owners are aware that commercial energy contracts tend to be fixed over a one to three-year period, meaning businesses are tied into the contract regardless of whether prices go up or down," she said.

"Some business owners don’t realise that they should start to compare energy rates around four months prior to the end of their current contract. Substantial savings can be made by shopping around for the best available tariffs."

All of the big six energy suppliers contacted Huffington Post UK to explain their protocols for business customers' contracts; each has slightly different renewal policies depending on the size of customer and their supplier.

Some will allow customers to issue a 'do not roll over' notice from up to 30 days before the end of the contract, but others require three months' notice.

All denied their renewal processes were bad practice; two suppliers - E.On and nPower - even confirmed they were considering adding contract end dates to their bills in future - a key recommendation from the Energy Forecaster's report.

npower

nPower is considering adding end of contract dates to its bills

Iain Walker, E.On's head of SME sales, said as well as becoming the first energy supplier to put contract end dates on bills, it was one of the few to offer online quotations, alongside traditional face to face or phone chats, to help customers find the right tariff.

A spokesman for nPower told Huff Post UK that it "worked really hard" to make the contract renewal process completely transparent.

Smaller businesses, such as those questioned in the survey, would be contacted 90 days prior to the contract expiry date, the spokesman said.

"We keep all of our processes under review, and printing contract end dates on our bills may be something we look into in the future," he added.

SSE confirmed it too wrote to customers within 90 days of the contract ending, outlining the contract renewal date and their options - including the opportunity to terminate the existing arrangement and prevent any extension to their contract.

EDF Energy echoed SSE and nPower, adding it had also introduced measures specifically aimed at smaller businesses including the ‘Blue +Business Fixed 4 year’ which offers electricity backed by low-carbon generation for businesses who want price certainty in today’s tough economic climate.

A spokesman told Huff Post UK EDF had committed to launch a new product aimed at entrepreneurs and start-ups that does not have termination fees, due out later this year.

Scottish Power meanwhile sends letters to customers 60 days before the contract's end using Recorded Delivery, although customers can terminate their contracts between 90 and 30 days prior to their contract.

Customers who send in a valid termination or a 'do not roll over' notice will move to a variable rate after their Fixed Contract ends, which they stay on until they move to another supplier or sign another fixed contract with Scottish Power.

It has also introduced a proactive outbound telephone call with a view to discussing the renewal process directly with customers.

british gas

British Gas believes many SMEs prefer automatic rollovers because they're simpler - agree?

And British Gas told Huff Post UK its end of contract letters typically went out four months before the contract was due to finish, with transparent pricing details for all of customers' options.

"Many customers take advantage of the auto-rollover because it is simple and avoids the risk of incurring higher Out of Contract prices, and therefore helps them manage their budgets," a spokesman added.

"Micro-business customers can notify us of their choice to opt-out of auto-rolling any time after their new contract starts and until 90 days before their contract ends.”

Do you think energy suppliers do enough to highlight when your contract is coming to an end? Let us know your thoughts below.

 
Presented By Chivas Regal Scotch Whisky