New Ofgem Regulations for Business Energy Contracts.
In January 2010 new Ofgem regulations came into force which were designed to protect small businesses from extortionate high contract rates due to the automatic rolling over of energy contracts.
So what is considered to be a ‘small’ business or ‘micro-business’ as Ofgemrecognise these companies they hope to protect with the new regulations.
How do I know if I qualify under the new regulations?
The new regulations only apply to businesses that fall into one of the following areas:
- Consume less than 200,000 kWh of gas a year, or
- Consume less than 55,000 kWh of electricity a year, or
- Has fewer than ten employees (or TFE’s’full-time equivalent’) and an annual turnover or annual balance sheet total not exceeding 2m Euros
Please note that a business needs only to fall into one of the above criteria to qualify as a micro-business and then benefit from the new regulations.
The new rules only affect those businesses that entered into a new contract on or after Monday 18th January 2010. Contracts signed prior to this date will remain under the older regulations until a new contract is signed.
How do the new rules affect my business?
The new regulations give you and your business more protection against unwittingly rolling into a new contract when your current contract ends. Here is a summary of how you will benefit from these newer regulations:
- Before entering into a contract the supplier must explain the key terms and conditions of the contract to the customerand make it clear that the contract is binding.This means that key clauses may no longer be hidden in the small print of the contract. All must be open and honest.
- Within ten working days of a contract being agreedor an existing contract being extendedthe customer will receive written ‘non jargon’ copies of the full terms & conditions and a statement of renewal terms. (if this applies)Approximately 60 calendar days (but no longer than 120 days) before the end of the fixed term period suppliers must send customers a statement of renewal terms and details of the key terms and conditions.Included in this the suppliers must inform the customer of what will happen if:
- The customer takes no action and the contract continues (roll over)
- The customer prevents their contract from continuing.
After the customer has received these renewal terms they then have a notification period of 30 calendar days in which they need to contact their current supplier and negotiate terms for a new contract. If the supplier offers a new deal then this must be presented to the customer in writing and must be valid until the end of the notice period.
If the customer chooses not to act within the notification window,the contract can be automatically rolled over for a maximum of 12 monthsprovided that the supplier has already given the statement of renewal terms.
To avoid being automatically rolled over into a new contract the customer can write to their supplier fromthe date when they agreed the fixed term contract to the end of the notification window. However, if the customer wants to cancel the contract it is important that they do so in accordance with the terms of their contract.
Simply,suppliers must now make sure that the customer is aware well in advance of when they should take action to terminate the contract and what will happen if they take no action.
What can I do to avoid being rolled into a new contract?
If your contract is not yet up for renewal to avoid the risk of being caught out by being rolled over into a new contract enter your details into our Contract Renewal Reminder Service.
By entering your details here Norweb Energy will send you a notification email based on the information given, to remind you when your contract is up for renewal and that notice must be given shortly.
Useful Questions and Answers
What if I qualify as a micro-business but my supplier doesn’t?
Speak to your supplier and make available supporting evidence that you think qualifies your business under the conditions for a micro-business.
What happens if I sign my new contract through an energy broker?
Signing via an energy broker will mean that you will still be protected under the new regulations. This is because the supplier has the responsibility of ensuring that all the necessary information is provided to the customer when signing a new contract.
Is there anything else should I look for when signing a new contract?
It’s important that you give the correct termination notice date to your current supplier to terminate your contract.
Importantly take control and ensure that you shop around for the most competitive price for the specific needs of your business.
Make sure that you read all the terms & conditions for the new contract before committing yourself, whether verbally, online or signing a paper contract. Please take note that unlike domestic contracts there is no cooling off period.
Clarify and understand what the term of the contract is in relation to the prices that you will be paying. Are they fixed?Will they vary? What are the key points of the terms & conditions with regard to termination notice periods? Keep all this information secure and easy to hand so that you can refer to it in case of any queries or disputes with your supplier.