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Criticism of climbdown on energy ‘rollover’ contracts. Pearson May News Update - Thursday 16 July
- The VAT treatment of deposits for land on which dwellings will be built
- Pension funds deeper in deficit
- Criticism of climbdown on energy ‘rollover’ contracts
Criticism of climbdown on energy ‘rollover’ contracts
A business group has expressed its dismay over a decision to backtrack on plans to ban rollover contracts.
The Forum of Private Business (FPB) said that the change of policy by Ofgem, the energy regulator, means more businesses will now be locked into expensive utilities deals.
Following a review of the energy market, Ofgem had proposed originally that suppliers should no longer be able to roll over fixed-term contracts automatically.
However, that recommendation has now been reversed, and energy companies are likely to be permitted to roll over contracts for up to a year at a time.
Utility firms had argued that banning rollover contracts would create additional costs for themselves and their business customers because providers use such contracts to purchase energy many months in advance.
But the FPB condemned the u-turn as likely to harm smaller businesses.
Phil Orford, the FPB’s chief executive, said: “It’s disappointing to see Ofgem stepping back from its initial stance on protection for small business customers. Business owners should have as much control as possible over their utility bills.”
The FPB claimed that allowing year-long rollover contracts would continue to stifle competition within energy markets.
Mr Orford continued: “Competition will only be increased by small businesses being able to shop around for suppliers.
“We want Ofgem to revert to its previous commitment to end rolling contracts for all businesses with 50 employees or fewer and turnovers not exceeding €10 million, which is the European Commission’s definition of a small business.”
The new proposals set out by Ofgem, such as specialised contracts, better information services and a requirement that suppliers give 30-day notice periods to allow businesses to renegotiate contracts, would cover only micro-businesses (those employing 10 staff or fewer) and not other small business employers.
The FPB said it wants to see a similar level of service provided to domestic customers offered to small businesses as well, above and beyond the micro-definition proposed by Ofgem.
In a utilities survey conducted by the FPB, 45 per cent of business owners who responded cited ‘unjustifiably high’ energy prices as the main issue.
Poor customer service was another significant complaint (30 per cent), along with incorrect billing (29 per cent) and difficulties in switching suppliers (22 per cent).
Colin Beake, who is the FPB’s adviser on utilities, commented: “Most often, only a single letter is sent out and a non-response is taken as a business being complicit.
“Business owners are extremely busy and, unless notice is given within the specified time to terminate these ‘evergreen’ contracts, utilities companies can just roll them over for a further year or two, sometimes at exorbitant prices.”
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