Businesses Risk Energy Bills Doubling at Renewal
Small firms may see their energy bills double when their contract comes up for renewal, energy advisory firm Makeitcheaper.com has warned.
According to the energy comparison site for businesses, suppliers are hitting small businesses with price increases of up to 100 per cent if their energy contracts run out and they fail to cancel their agreement or move to a new supplier before their existing deal runs out. Domestic customers typically see price rises of around 20 per cent.
The poll of 750 businesses revealed that half were unaware that they had to terminate their contract within a certain time frame. Failing to notify a supplier in time means that small firms can often find themselves trapped in expensive contracts that have been ‘rolled over’ automatically for another year.
Many small firms have been hit severely by renewal price hikes. Fashion retailer Doodie Stark in West Sussex saw its energy rate double from 8p to 16p per unit, while David Field, owner of a Norwich-based dog kennels, saw his electricity rate soar to 24.5p a unit before he switched supplier.
Energy regulator Ofgem said it had introduced new regulation last year to help protect micro-businesses – defined by the watchdog as those with fewer than ten staff – with rollover contracts now limited to one year, instead of up to three years previously. However, the rules are not legally binding, Ofgem spokeswoman Lydia Fitzpatrick said.
"We don’t investigate individual complaints, so any business with an issue is advised to follow the complaints process through their supplier at first. We would consider action if we suspected suppliers weren’t complying with regulations. In the worst cases, the regulator had the power to fine up to 10 per cent of a supplier’s annual turnover."
Fitzpatrick advised small firms to find out exactly when their contract was due to end, in order to avoid getting trapped in costly new agreements. In particular, business owners on fixed-term contracts needed to take note of any window period for deciding whether to stay or switch. Keeping copies of all correspondence was also important, she added, in case of disputes.
Suppliers are also now required to give micro-businesses clear written details of their fixed-term offer at least 60 days before the end of the contract. Customers will normally have at least 30 days to decide.
"Remember, if your contract does run out, your current supplier will still provide your energy until you switch, but you may end up paying an out-of-contract rate which could be much higher than your current one," said Fitzpatrick.