OFGEM PROPOSALS GOOD NEWS FOR SMALL BUSINESSES - ALEXANDER

26-Oct-2012

Inverness, Nairn, Badenoch & Strathspey MP Danny Alexander has welcomed energy regulator Ofgem's latest proposal to make the energy market fairer for small business customers in the Highlands and across the UK.

The proposals would increase the number of small businesses that benefit from its existing safeguards, covering an extra 150,000 businesses that typically spend up to £10,000 each per year. There will also be a new code of practice for energy brokers.

Highland MP Danny Alexander said:

"This is welcome news for those small businesses, vital to the Highlands' economy, who are struggling with rising energy costs. Until now Ofgem's rules only protected the smallest companies, but if these proposals go ahead those spending up to £10,000 will be included -making it easier for them to shop around for the best deals.

"I hope small businesses in the Highlands will get behind these plans."

ENDS

Notes for editors:

Ofgem report that:

• The business energy market is more competitive than the household sector. In gas, the Big Six suppliers between them have a share of around 20% of the market by volume. In electricity, their share of the market totals 78%. However, between April 2011 and March 2012, there has been significant growth in the proportion of electricity customers served by non Big Six suppliers.

Ofgem's investigation showed that businesses may miss out on chance to shop around for better deals because:

• They aren't clear about the terms and conditions of their contract, when it ends, or when they can let their supplier know that they want to switch when their fixed term deal ends. This is especially true for smaller business that do not have specialists managing their energy contract
• They face problems and/or delays when transferring to a new supplier as a result of the above, or from poor supplier behaviour. This could also mean the business customer has to pay higher deemed or out of contract prices while the issues get resolved.
• Poor behaviour from some brokers, which could result in, for example, a business finding themselves contracted to a new supplier with higher rates than expected.

What do the rules around clearer contracts say?

• These rules currently apply to contracts for Britain's smallest businesses (micro-businesses) which typically employ 10 employees or less. Companies up to this size typically spend around £5,000 per fuel on energy.

The rules say that:

• Before entering a contract a supplier must explain key terms and conditions to the business, making it clear the contract is binding.
• Within 10 days of a contract being agreed, the business should receive written copies in plain and intelligible language.
• The supplier will contact the business with details of its new fixed-term offer at least 60 days before the end of the contract. Once the business receives this letter it has at least 30 days to contact the supplier to let it know if it wants to
• Sign up to the supplier's new offer, or if it prefers to switch to a new supplier once the deal ends. If the business does not contact the supplier to sign up to their offer, negotiate a new deal, or say it wants to switch, the maximum length of time the contract can be automatically rolled over for is one year.

Ofgem's proposal is that these rules are extended so that more than 150,000 businesses that typically spend up to £10,000 on each fuel will be covered. Ofgem is asking for views on the size of businesses that should be covered by this reform. Once this has been decided in the New Year, it will be able to calculate the impact automatic rollover of contracts have and look at whether or not it is in small business customers'interest to allow them.

Ofgem is further proposing that all bills and statements that small businesses are sent also show clearly when the contract ends, so that fewer businesses get caught out and pay more for their energy than they need to.

Of gem is legally required to go through an extensive consultation process but they are aiming to start introducing our reforms from summer 2013.