Energy Contracts for Businesses
Ofgem is the regulatory body for the energy market within the UK, so it is important to be kept up to date with any new changes they make. This applies to both suppliers and businesses. Being knowledgeable of Ofgem regulations could make a huge difference to your monthly energy bills. Listed below is some helpful information we think everybody should now.
Ofgem requires suppliers to disclose the end-date as-well as the notice period on all of their bills for any fixed-term contract. This is to help small businesses research the energy market and compare prices. They also allow smaller businesses the ability to tell their energy supplier that they would like to switch supplier at the end of their contract at any time. This can even be before the notice period.
If your contract started either on or after the 30th of April 2015, then the notice period for terminating a contract has been reduced. The old notice period was 90 days long, it has now been shortened to 30 days. Further to this, energy suppliers now have to tell smaller firms how much energy they have used each year and also inform them on how the price of their current deal stacks up against new prices. This should be provided at around 60 days before your fixed-term ends. This should help redistribute the power from supplier to customer when it comes to negotiating a new contract.
What do you need to do to prove you operate a ‘Micro-business’?
Micro-businesses are more common than you may think within the UK. A micro-business is defined by the following:
- Operating with less than 10 employees and an annual turnover/balance sheet of < €2,000,000.
- OR Consumption of electricity falls below 100,000 kWh annually.
- OR Consumption of gas falls below 293,000 kWh annually.
This amount of energy roughly equates to about £10,000 (Excluding VAT and other taxes/levy’s) annually for each fuel-type. If you are paying more than this then you should contact your supplier.
It is your responsibility to provide relevant information regarding your business and to prove the three qualifying statements above. In return your supplier is required by Ofgem to undertake reasonable steps to identifying if your business qualifies as a micro-business.
Your supplier doesn’t think that you operate as a micro-business – what do you do?
It is unsurprising that sometimes there are disputes regarding the definition of businesses. If this happens to you then the first thing that you should do is gather the relevant evidence to prove the three qualifying statements, or as much as you can possibly find. Once you have done this you should approach your supplier with this evidence. If the dispute continues, then you should remind them of their responsibility to take reasonable steps in the identification process.
Your contract has been continued without any consent – why?
If you do not inform your supplier that you intend to end the contract before the notice period then it is likely that they have ‘rolled’ you over to a new contract. It is important to know if your business qualifies as a micro-business or not if this is the case. If it does, then suppliers can only continue on this rolled-over contract for one year maximum according to Ofgem.
You are looking for a new energy supplier – what should you look out for?
First of all, you should definitely research what type of energy contract it is that suits you best. Not every type of contract suits every customer. Once you have found a contract that looks good, it is important to actually understand the content within it. It is easy to get caught up in industry jargon, but it is well worth taking the time to understand exactly what it is you are signing up for. The terms and conditions and statement of renewal terms are two key locations where you should focus your expansion of understanding. You should also keep them in-case you need them in the future. Once signed up, ensure to keep a copy of all correspondence – this will help with any possible disputes.
What is a deemed contract?
These contract-types are used whenever you move into a new premise and there is no contract agreed with a supplier. This only happens if you begin to consume electricity or gas. Another situation where this may arise is if you end your existing contract but continue to use energy.
This may seem strange – but it can arise in the following ways:
Firstly, if the original contract is terminated by either customer or the supplier – but the supplier continues to supply energy. A deemed contract is likely to arise if there is no clear statement in the original contract of what will happen after termination. This in combination with continued usage of gas or electricity could lead to a deemed contract.
Secondly, if the original contract expires but you continue to use gas and electricity you are likely to be placed on a deemed contract if the original contract does not clearly state what will happen after expiry. Sometimes supplier contracts do not contain renewal provisions, or sometimes state that the original contractual terms still apply. If the existing customer has told their supplier that they do not wish for the original contract to continue any farther, it can also lead to a deemed contract.
It is important to note that these deemed contracts offer prices on average 80% higher than charged rates within normal negotiated contracts. If you think that you are on a deemed contract, then it is important to contact your supplier and research other supplier prices. It is estimated that around 10% of micro-businesses are currently on deemed contracts – so this could apply to you.
What are your rights when placed on a deemed contract?
Listed below are all of the responsibilities your supplier must do:
- Take all reasonable steps to provide you with the Principal Terms of your deemed contract. This includes the charges and fees.
- Provide a full copy of the contract should you ask for it. It is recommended that you do.
- Take all reasonable steps to inform you of other available contracts, as-well as how to obtain information on them.
- Take all reasonable steps to make sure that the deemed contract does not contain terms that are unduly onerous.
Listed below are all of the actions that your supplier cannot take:
- Prevent you from switching to a different supplier. They cannot prevent you from switching at any time or for any reason. This is hugely important to know.
- Cannot require any period of notice before terminating deemed contract.
- Cannot demand a termination fee for cancellation of deemed contract.
Who can help you with energy bills and budgeting?
If you encounter trouble paying your bills or find a problem with the proposed payment plan presented by your supplier, then you should contact The Citizens Advice Consumer Helpline. They will offer advice to anybody who seeks it. Other websites that are recommended for those struggling with budgeting or managing debt are listed below:
These websites offer free advice to anybody that seeks it. If you have any worries do not hesitate to reach out to these resources, the earlier you do the more likely you can solve any issues you face.