New rules for small business energy suppliers

3 November 2009

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The energy regulator Ofgem has announced a new set of measures intended to help small business energy customers. This will affect the way energy is sold and marketed to your business, prohibit unjustified price differences and give you more flexibility to switch suppliers.

These changes have started to be rolled out and will continue to be implemented into early 2010, so if you're planning to sign new energy agreements in the near future, read on to find out how these changes will affect your business.

Following a major investigation into the energy market, to which the FPB contributed members' experiences, Ofgem discovered that small businesses customers were being "woefully served" by energy suppliers. In response, they have introduced the following changes:

Greater protection for small businesses that make up the majority of commercial consumers
Limiting the automatic rollover of fixed-term contracts, which has resulted in businesses being locked, without being aware, into unfavourable long-term contracts
Prohibiting unjustified price differences between tariffs and payment types.

Improving protection for small business customers

These measures, effective from 18 January 2010, are intended to help small business customers that employ fewer than ten people, use less than 200,000 kWh of gas a year or 55,000 kWh of electricity a year, or which have an annual turnover of less than 2 million Euros.

Business contracts often include 'notification windows' which start three to six months before the end of a contract, and which many businesses are not aware of. Therefore a significant number are 'rolled forward' on to new contracts without their knowledge.

Ofgem has increased protection for these businesses with new rules meaning that:

before entering into a contract a customer must be informed of the key terms and conditions
within 10 days of a contract being agreed (or if an existing contract is extended) the customer should receive hard copies of the full terms and conditions and a statement of renewal terms (if the contract is of a fixed length)
customers will be contacted a minimum of 30 calendar days before the end of the notification window with an explanation of the options available including advice on what they should do to stop their contract from being rolled over, if they don't switch or negotiate a new deal the maximum length of time a contract can be rolled over for is 12 months and at any point from when the contract is agreed until the end of the notice period, customers can give notice that they wish to terminate it at the end of the fixed term period.

Unjustified price differences

Energy consumers pay different prices depending on their payment method (cash, cheque, direct debit, or pre-payment meter).

New licence conditions, effective from 1 September 2009, mean suppliers cannot charge more for one payment type than another, unless the changes can be justified by cost of providing the payment method and prohibit other forms of undue discrimination.

For more information, download a factsheet from the Ofgem website.

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New rules for small business energy suppliers

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