Automatic Business Rollover Contracts to Cease
Business owners will not be forced into automatic renewal of their contracts later this year. British Gas will no longer sell them from September 2013 for existing customers.
The biggest headache for business owners with energy contracts is about to cease. So called rollover contracts, where prices are increased by 40% or more at the same fixed period as the original contract, will no longer be sold by energy giant British Gas.
New customers switching from September 2013 will not be 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 year but a bill passing through the house failed to make full passage in the last session. 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 currently means they are unilaterally forcing market and industry behaviour and it is expected all other suppliers will follow suit. BGB need to make changes in their billing system to accommodate these changes but are 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:
- No new rollover contracts will be sold to new customers 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 will be placed onto a variable priced tariff (prices to be announced) that they can switch out of “at short notice”
Additionally new variable priced contracts for fixed terms are also being introduced. This is also a first in the business energy market as all SME contracts are fixed priced.
Current Problems with Rollover Contracts
In the current climate business owners sign up to one, two or three year fixed priced and fixed term contracts. At the end of the contract period a termination noticed is required to be able to move onto a new contract either with the same or a new supplier.
If no termination is sent the energy provider will renew the contract for the same period that was originally signed up for. Additionally the rates are increased by 30-40%. For example a business signing a three year contract will be subject to another three year contract with priced 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 are 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 and 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 and 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.”