Automatic Business Rollover Electricity Contracts to Cease

Business owners stopped being forced into an automatic renewal of their electricity contracts in September 2013.

The biggest headache for business owners with energy contracts is about to cease. So-called rollover contracts, where prices increase by 40% or more at the same fixed period as the original contract, are no longer sold by energy giant British Gas. British Gas Business (BGB) was the first to stop the rollover contract rip-off starting September 2013 for existing customers.

New customers switching from September 2013 won’t get subjected to the auto-renewal process, and existing customers can opt out from June 2014.

Business leaders, brokers, industry regulator Ofgem and Parliament have been attempting to outlaw this practice for many years. A private members bill passing through the house failed to make full passage in the last session during 2012. Nothing happened since, but the energy companies made their own changes. Previously Eon stated that they would end the process of rolling over customers but required all energy providers to follow suit before they would conform.

The announcement from British Gas Business meant they unilaterally forced market and industry behaviour. All other suppliers then followed their lead. BGB needed to make changes in its billing system to accommodate these changes but is committed to ending this practice in the UK market.

Changes British Gas are Making

The changes are not immediate and affect existing and new customers differently as follows:

• New customers won’t have the rollover clause in their contacts from 1st September 2013.
• Existing customers can opt out of their auto-renewal process from June 2014.
• Customers that don’t renew their fixed-term contract get placed onto a variable-priced tariff that they can switch out of “at short notice”.

Additionally, BGB is introducing new variable-priced contracts for fixed terms. This change is also a first in the business energy market, as all SME contracts are currently fixed-priced.

Current Problems with Rollover Contracts

In the current climate, business owners sign up for one, two or three-year fixed-priced and fixed-term contracts. At the end of the contract period, the supplier requires a termination notice period to move onto a new contract either with the same or a new supplier.

If the energy provider doesn’t receive a contract termination, they will renew the contract for the same period that was originally signed up for. Additionally, the rates increase by 30-40%. So, for example, a business signing a three-year contract will be subject to another three-year contract with prices at least 30% higher than before.

Options for Your Current Contracts

Although the move by British Gas will take some time to implement, all current contracts by all suppliers are set to auto-renew. Therefore you should still shop around for quotes, send off termination letters and hunt down the cheapest deals available.

The cheapest prices for most small to medium-sized businesses range between 9.2p/kWh and 11.8/kWh together with a daily standing charge of approximately 21p – 23p. If you are paying any more than this, then you are paying too much.

What are People Saying?

This is a major change in the way the energy companies are interacting with the business community.

Prime Minister David Cameron said “I know that auto-rollovers have similarly been a big issue facing small business so two months ago, I set up a cross-industry group on this issue. I am therefore delighted to welcome British Gas’s leadership. I hope that other suppliers will rapidly follow suit.”

British Gas Business Managing Director Stephen Beynon said “We’re the first supplier to announce an end to auto-rollover contracts. We’re calling on the industry and the regulator to work together to ensure that all customers have a transparent choice of products that never include auto-rollover.”