Business Energy Market to Get a ShakeUp

PylonPlans are in the pipeline that should see the energy market for small businesses get a positive shakeup.

Ofgem, the energy regulator, wants gas and electricity provision companies to make bills for business customers clearer. This will start with an extension to the rules that force energy companies to make it easier to see on paperwork the dates that energy contracts expire.

Currently microbusinesses, those with fewer than 10 employees and who spend up to £10,000 for both gas & electric, benefit from this rule and Ofgen wants to extend this to firms with bills up to £10,000 per annum on each of their gas & electricity supplies.

The Rollover Trap

One of the problems that Ofgem wants to protect businesses from is the "rollover trap" where firms are locked in to paying higher rates for at least another 12 months after their current contract ends.

By making contract end dates clearer Ofgem wants power companies to help small businesses avoid the rollover trap.

Ofgem also wants to stop energy brokers from giving misleading information and using high-pressure sales tactics.

Andrew Wright, Senior Partner Markets, at Ofgem, said of the plans:

“Small businesses want fairer treatment from suppliers, clearer information about contracts, and more protection from mis-selling. Our reforms seek to address these issues.”

The energy regulator is currently investigating claims that British Gas Business may have breached rules on the switching process by possibly having barred some businesses from switching their energy providers.

Shopping Around

Ofgem has identified that small businesses are at a disadvantage to their larger counterparts where there is often an employee assigned to identifying cheap energy deals and negotiating with suppliers fir their gas & electric.

The regulator wants the finish date of contracts to be clearer so that smaller businesses are better able to see when they can enter a new contract and thus negotiate better deals with energy suppliers.

However, following in the footsteps of a statement by Prime Minister, David Cameron, saying that energy companies should put domestic consumers on the cheapest tariffs, is not yet on the cards.

Forcing energy companies to place their business customers on the cheapest tariffs is something that price comparison services have been insisiting on for some time.

Julian Morgan, Managing Director of Energy Advice Line said:

“We have long been calling on Ofgem to force suppliers to offer businesses their best prices when fixed-term contracts come up for renewal, because under current arrangements they often do the exact opposite.”

By giving businesses clear contract end dates they should be better able to shop around before their energy contracts are up for renewal.

For more advice on finding the best deals see Energy Advice Line’s Business Energy Best Practice and Advice Guide.

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