Energy
OFGEM: CHANGES TO MICRO BUSINESS CONTRACTS
Key Information:
These new measures will only be applicable for contracts entered into after 19 January 2010; therefore ACS would advise members to negotiate new contracts or switch suppliers as soon as possible after 18 January 2010 to take advantages of these new safeguards.
Since these measures will not be applied retrospectively it means that if your current contract stipulates that if you do not renegotiate then your contract will be rolled over for a number of years then they will still be able to do this for at least one year. We therefore recommend that you look to switching suppliers or entering into a new contract after 18 January 2010.
These new safeguards will only be applicable for people with a micro businesses contract. A micro-business is defined as those businesses “that employ fewer than ten people (full time equivalent) throughout their business and which have an annual turnover of less than 2 million Euros; or which use less than 200,000 kWh of gas per year or 55,000 kWh of electricity per year.” For energy companies the quickest way for them to access if you are a micro business is to look at your energy consumption. However if your energy consumption is higher than 200,000 kWh of gas per year or 55,000 kWh of electricity per year (which is likely in convenience stores) but you employ less than 10 full time equivalents and have a turnover of less than 2 million euros then you will still be a micro business. It is important that retailers highlight this to their suppliers when making a new contract, although it should be noted that you may be asked for proof.
In addition it is important to note your business’ status when you first enter the contract will stand for its length. Therefore if at the beginning of your contract you are classed as a micro business, you will remain in this classification and have the benefits of these safeguards during the duration of the contract even if you end up expanding. Conversely if you lose staff and employ less than ten full time equivalents during your contract you will not be able to benefit from these safeguards.
Key Safeguards
The new safeguards include;
· Ofgem propose to introduce measures restricting suppliers' ability to automatically roll a small business customer onto a subsequent fixed-term contract which can often have expensive tariffs. Now, the longest length of time a contract can be automatically rolled-over will be no more than 12 months.
· Additionally before a supplier can role over a contract they have they need to meet certain criteria. In particular, a supplier would need to demonstrate the following:
· That customers can give notice that they wish to transfer to another contract at any time from the inception of the contract until the close of the regular notice period. This is an important step forward and means that as soon as you take out a contract you can inform the energy companies you would like to terminate it at the end of your deal. This stops expensive roll over tariffs
· That there has been a minimum period of 30 calendar days between the time a customer is sent a reminder notice that the fixed-term period of their contract is due to come to an end and the last point they are able to notify their supplier that they would like to switch supplier or agree a new contract;
· When contacting customers to alert them that their contract is coming to an end, and offering new contract options, suppliers will be required to promote customer engagement by highlighting the importance of the material, making the customer aware of their options and what action they may wish to take;
· There also will be introduction of license requirements to increase the amount and timeliness of information that energy suppliers provide to small businesses regarding their contract terms and conditions when they start a new contract. This will mean that energy supplier must send retailers the following information:
o A clear summary of key terms and conditions should be provided to customers before a contract is agreed alongside confirmation that businesses are entering into a micro business contract
o Once the contract is agreed energy suppliers must send customers full terms and conditions within TEN working days
o Once the contract is agreed suppliers must also send a statement of renewal terms- when the 30 day notice period will begin, information on how customers can terminate their contract (with a postal and email address) and details of the consequence of not sending in notice
o A full copy of contract terms and conditions which should be provided to customers in writing each time a customer agrees a new energy contract.
In addition to these proposed license changes, Ofgem are working with Consumer Focus towards extending its accreditation scheme (the Confidence Code) to include internet price comparison and switching sites for non-domestic consumers.
Whilst Ofgem has no direct powers to regulate Third Party Intermediaries (TPIs) they have proposed a range of self-regulatory measures to improve consumer confidence in the working practices and services offered by TPI. Ofgem has recommended that:
· TPIs seek advice from the Office of Fair Trading (OFT) on developing one or more of the existing voluntary industry codes of practice or create a new code of practice;
· TPIs seek to promote one or more of the existing codes of practice or a new code of practice to establish best practice among a wide membership and to build consumer confidence - in particular, by ensuring that TPIs accredited under any such code(s) of practice are required to explain before a customer signs any contract: (i) how they are funded, and (ii) which suppliers are covered by their brokering services; and
· customers and suppliers consider a TPI's practices prior to entering into a business arrangement with them. Suppliers and consumers both have a role to play in exerting pressure on TPIs to demonstrate robust and transparent business practices.
Ofgem have released a fact sheet with an overview of the new measures
http://www.ofgem.gov.uk/Media/FactSheets/Documents1/probefs.pdf
To read the MicroBusinesses fact sheet on the new measures, which came into place on January 10, click here:
For further information regarding how to switch energy suppliers, please read this advice leaflet published by Consumer Focus http://www.consumerfocus.org.uk/assets/1/files/2010/01/Switching-energy-supplier-–-advice-for-small-businesses1.pdf
Power Supply Failure
If you’re energy supply is cut off for a period of time you may be entitled to some compensation under the Guaranteed Standards. For further information of what you may be entitled to, and how to claim, please read this document. http://www.eon-uk.com/downloads/Final_NOR_September_2009.pdf
Micro Business Check List
To make it easy for micro-businesses to take advantage of the new rules, Consumer Focus has produced the Micro-Business Check-list:
- Check whether your business qualifies as a micro-business and is therefore eligible for the benefits of the new energy contract reforms.
- Contact your energy supplier to let them know that you are a micro-business and should be treated as such.
- Check your energy contract. The new rules will apply for any contract signed after 18th January 2010. Contact your supplier if you don't have a hard copy or do not receive one when you enter into a new contract.
- Look out for correspondence from your energy supplier as you approach the end of your energy contract. You should receive a letter as you approach the contract's notice period, which could contain important information.
- If you do not wish to be rolled-over at the end of any contract signed after the 18th January 2010, inform your supplier that you want to opt-out.
- If you opt-out of rolling-over, but do not negotiate a new contract, you are likely to be placed on 'out of contract rates' with your current supplier. While on out of contract rates, energy brokers may call claiming to offer you the best available deal. Do not commit to any offer on the phone and check with your current supplier to see if they can better the broker's rates.
- If you inform your supplier that you are a micro-business but do not opt-out of rolling over, you are likely to be rolled over into a new contract. You should receive a hard-copy of this roll-over contract within 10 days of the end of your previous contract and should check that this contract lasts no longer than 12 months.