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Small business owners are advised that Ofgem's new rules for the small business energy market have come into effect.
However, while Ofgem's attempt to offer SMEs greater protection has been welcomed there are fears that the new rules have fallen short of the simple blanket ban on evergreen or rollover contracts that was initially proposed and, as a result, are in danger of confusing busy SME owners.
If you are a 'micro-business' and signed your contract after 18 January 2010 your supplier will send you notification of when your contract ends 60-120 days before the end of your contract. Once you have received this notice you will have 30 calendar days to renew your contract or switch supplier. The new rules only apply to micro-businesses, which Ofgem defines as a company that meets any one of the following criteria:
- Consumes less than 200,000 kWh of gas per annum
- Consumes less than 55,000 kWh of electricity a year
- Has less than ten employees (or the full-time equivalent) and an annual turnover or annual balance sheet total of €2m or less
"Small businesses now have the right to opt out of seeing their contract be rolled-over by energy companies - as soon as you sign a new energy deal let the supplier know you are opting out and this means that you can only be put onto a 28 day notice rollover plan at the end of your contract leaving you free to move to a better deal,"
"The rules are complicated and unfortunately put too much onus on SME owners. But it's a step in the right direction and should hopefully see more small businesses avoid the expensive trap of 'evergreen' energy contracts."
Guide to cutting business energy bills:
1) Make a note of your renewal date on your current contract and make sure you start searching for a new deal before it comes up. You need to give termination notice to your current business energy supplier before the minimum notice period prior to your renewal date ( that could be more than 120 days prior to your contract end ). Use this sample gas/electricity termination letter template
2) Have recent electricity and gas bills to hand so that you can supply accurate usage details along with the reference numbers of your meters (MPRN for gas and MPAN for electricity).
3) Compare prices above, submit a form below or call us direct to discuss your needs.
4) Once you have your quotes, decide whether to switch or not
5) If you switch, you will need to give termination notice to your current business energy supplier and agree to your new contract - all other paperwork is dealt with for you.
6) The whole process takes between 4 - 6 weeks - your new supplier will advise you of the switching date.
7) There will be no interruption of supply while the switch is being processed.
Before you decide to change supplier you need to gather the following
information to ensure that you can make an informed decision:
• The amount of energy you use
• The terms of the contract you have with your current supplier (and
metering service provider, if you have one)
• Details of the premises you own or occupy, including any special
metering arrangements
If your business meets the criteria for a micro-business, you will receive
additional protection.
I have a fixed contract –
can I leave early?
Usually it would be best to wait until your contract expires to switch
supplier. If you decide to end your contract early, or you fail to follow the
procedure of termination stipulated by your contract, you may be forced to
pay a termination fee. The exact fee varies by supplier, but can be as much
as six months worth of estimated energy consumption.
There are also other potential charges you may face for breaking the Terms
& Conditions, or for other events, such as a minimum charge if a business
premises is left empty, missing a meter reading, or even for re-sending
documents. If you are considering leaving your contract early it is wise to
check with your supplier to confirm their terminations fees.
Can I switch at the end of
my contract?
Before you switch you will need to check your contract to ensure that
you switch during the transfer window. If you have a fixed term contract
you are only able to transfer once that term has come to an end and you
have followed the correct termination process. This may include notifying
your supplier of your intention to switch before your contract comes to
an end. If you are unsure when your transfer window is check with your
current supplier.
If you are a micro-business and signed your contract after 18 January
2010, your supplier will send you notification of when your contract ends
60-120 days before the end of your contract. Once you have received
this notice you will have 30 calendar days to renew your contract or
switch supplier.
What happens if I miss the
transfer window?
If you do not transfer within this period your supplier is likely to object
and block the transfer. It is critical to ensure you undertake the switching
process in a timely manner.
How do I get a quote for a
new contract?
Before you ask for quotes from energy suppliers, or issue a formal tender
document, make sure you have as much of the following information as
possible for all the relevant premises:
• The full address and post code for all of your premises
• The reference number for all meter point(s) as shown on a bill(s)
from your current supplier (this could be the Meter Point Reference
Number (MPRN) for gas and Meter Point or the Administration
Number (MPAN) or also known as the Supply or ‘S’ number for
electricity). You may have more than one meter point for either
energy source at your premises; you can check this with your
current supplier if you are unsure
• Meter Serial Number(s) – the number printed on your meter(s). If
in doubt you can ask your supplier, who could offer arrange a meter
reading visit (although you may be charged for this)
• Your best assessment of the annual amount of energy used, the
nature of your business including whether it is a micro-business and
its consumption patterns. Different prices may apply depending on
seasonal changes or the time of day at which you need to use energy
• Your most recent energy bill
What do I need to ask my
potential supplier?
Next you need to approach energy suppliers to negotiate a new contract.
Below are nine key questions you should ask a potential energy supplier
to ensure you get the right deal for your business:
1. What is the charge per unit?
• Are there any fixed or standing charges?
• For electricity, are there any capacity charges per KVA?
2. Can the price I pay for energy change during the life of the contract?
If so, how will you tell me about this or any other changes to
the contract?
• Are charges fixed or variable?
• If they are fixed, how long for?
• If they are variable, which parts may vary?
3. What happens at the end of my contract or the fixed-term period if I
stay with you as my supplier?
• What can happen at the end of my contract or the fixed-term period
if I do not renew my contract?
• What do I need to do if I do not want to renew my contract?
4. What is the length of this contract?
• Will you remind me of the contract end date?
• What do I have to do if I want to end the contract early?
5. How and when do I contact you if I want to switch energy supplier?
• In what circumstances can you stop me switching to another
energy supplier?
6. Who can I contact to find out more information about my contract,
and what information will they need from me?
7. Do you offer special tariffs for micro-businesses? If so, do I qualify?
8. Under what circumstances can my energy supply be cut off and
what warning would I be given and what procedures must be
followed?
9. What options do I have on payment terms?
10. Am I committed to a minimum or maximum volume of energy? If so
what charges could I incur if I use less or more?
In particular, you need to look at price per unit, length of contract and
how you can leave your contract at a later date.
Top tips to saving money
during the contract
renewal process
• Give yourself plenty of time to shop around before the termination
window finishes. Once it does, you will no longer have any choice
• Check with various suppliers to ensure you are getting a good deal
• Ensure you ask the supplier what price changes they intend to make
if the contract ‘rolls over’
• Ring up and pressurise your supplier to offer better terms
It is essential that you provide all necessary information
to your new supplier and that you monitor the situation so that if
a problem occurs you can attempt to rectify it as soon as possible
My existing supplier won’t
let me switch – can they do
that?
Your existing energy supplier is allowed to object to your request to move
to another energy supplier. This can be for several reasons, the most
common are:
• You are still under contract. To prevent this ensure that you are
aware of the end date of your contract and switch supplier within
the transfer window. If you run a micro-business and your contract
was signed after 18 January 2010 your supplier will send you
notification of when your contract ends 60-120 days before the end
of your contract. Once you have received this notice you will have 30
calendar days to renew your contract or switch supplier. This is the
best time to switch
• You have an outstanding debt to your energy company. Ensure any
debts you owe the energy company are paid off before transfer or
else they may object. Unfortunately, the transfer process can take
one to three months so it is likely that the account will accrue debt
during the transfer process. Ensure any debts in final statements are
paid off as quickly as possible
• You are not authorised to change supplier, eg the supply to your
premises is not part of a landlord’s contract and your energy supply
is included in the rent you pay to your landlord
Each supplier has different policies on objecting so it is wise to ask your
energy supplier for information on their objection policies before you
begin the switching process.
What happens if I still don’t
have a new contract when
my existing contract ends?
If you run a micro-business and your contract runs out before you have
agreed a new contract with a supplier, you will be ‘rolled over’ on the same
terms and conditions for a further 12 months. To ensure this does not
happen be aware of the termination dates and transfer window of your
current contract.
Who to contact
If you have an enquiry or if you need advice
about a problem or switching your energy
supplier please contact Consumer Direct on
08454 04 05 06 or visit the website:
www.consumerdirect.gov.uk
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