OFGEM, the regulator for gas and electricity, were concerned that “micro-business” customers are unable to participate effectively as buyers in the business gas and business electricity supply market because of certain terms and conditions in their supply contracts.

With the realisation that many of the Micro businesses customers adopt the same mind set as the domestic/household customer OFGEM needed to afford them the same level of protection.

So what is a Micro Businesses as defined by OFGEM?

A micro business is defined as a business employing fewer than 10 full time staff with an annual turnover of less than 2 million Euros (approx £1,800,000), or energy use of less than 200,000kWh’s of gas a year or 55,000kWh’s of electricity a year.

The market probe has resulted in the implementation of a new set of rules that go some way to alleviate the issues facing micro-businesses but it is our opinion that it does not go far enough to afford the protection that these consumers deserve.

OFGEM had identified the main areas of concern after an extensive probe of the market but have not used the information and made strong enough rule changes. The one area of concern is that OFGEM have still not gone far enough to protect the customer when their contract is approaching the end of the fixed term end date.

The assumed renewal tactic employed by the supply companies has been widely criticised by customers for many years and the initial proposal written by OFGEM for industry consideration in the summer 2009 did not allow the supplier to assume the contract renewal but this was watered down in the final release in October after the industry had an opportunity to counteract the proposal.

The majority of businesses in the UK are micro-businesses and the OFGEM probe uncovered evidence that they were finding it difficult to understand and participate effectively in the market. This was largely due to suppliers having different contract termination clauses hidden within the small print.

As a result of the probe OFGEM has increased the protection for Micro Businesses with the following new rules:

• Before entering into a contract a customer must be informed of the key terms and conditions
• Within 10 days of the contract being agreed the customer should receive hard copies of the full terms and conditions and a statement of renewal terms if the contract is fixed length
• Customers will be contacted a minimum of 30 days before the end of the contract period with an explanation of the options available and including advice on what a customer should do to terminate their current contract and stop the supplier from assuming contract renewal for a further fixed term contract period.
• Customers at any point from when the contract is agreed until the end of the notice period can give notice that they wish to terminate it at the end of the fixed term period.

These rules come into force on 18^th January 2010, however they will not apply retrospectively and so will only affect existing customers when they come to terminate or renew their supply contracts.

In summary, we would have liked to have seen OFGEM implement their original recommendation of stopping contract roll over’s and thus affording the business consumer the same protection as a domestic customer but this is a good first step forward as the new rules provide a consistent approach for all suppliers to adhere to and for all customers to understand.

At the Energy Advice Line we are also pleased to confirm that we meet the recommendations by OFGEM for price comparison services and brokers to provide a code of practice that provides information on its supplier panel, what our remit is and how we are paid.

The Energy Advice Line Key Facts information can be found at http://www.energyadviceline.org.uk/key_facts.php

For further information this pdf download provides a useful guide for small business. http://blog.energyadviceline.org.uk/wp-content/uploads/2010/01/OFGEM-Mico-Business-Changes-Newsletter-WEF20100118.pdf

It was  interesting to read in his New Year message the CBI director-general Richard Lambert highlighted a number of risks and opportunities for British Business in the year ahead concluding.
“The message is that the UK does indeed face big structural problems – but with sufficient determination they can be largely fixed within the lifetime of the next parliament. At the same time, the job of political and business leaders is to focus relentlessly on those policies that will enable a different and more sustainable pattern of economic growth for the future – education and skills, enterprise and innovation, competitive taxes and flexible labour markets, private sector investment, trade growth and open markets”.

I must admit that although the Director General’s message is fine at a higher level, for a lot of small businesses there is still a need to be ‘focused on cost savings’ to remain competitive and watching the overheads to ensure they survive in what is still a recessionary period, key to this is their business energy bills.

Company Directors often find themselves with their business electricity and business gas bills forcing them to reduce costs elsewhere because of contract rates that are crippling their operations. However, changes to the supply licence by the regulator OFGEM will benefit small businesses and help them avoid the pitfalls of the big 6 suppliers assuming renewal on very uncompetitive rates for lengthy contract durations. This will benefit business customers signing up for new contracts from 18th January 2010.

Utilising our services as an independent energy comparison service can often save a business a great deal of time and money when it comes to searching for and negotiating the best deal possible for their business electricity or business gas requirements.

At Energy Advice Line we have tailored ourselves as consumer champions of the business energy market, believing that everyone should be entitled to clear, trustworthy and impartial advice about their business energy bills.

With an in-house team of specialists we can assist customers with any information or queries they may have, in the first instance though it is worth visiting our web site www.energyadviceline.org.uk or calling 0800 915 1800

Please note that we will be updating our blog with specific information of the regulatory changes in the next 2-3 days.

To read the Director Generals full message published: 01 Jan 2010 on www.telegraph.co.uk
please follow this link.
http://www.telegraph.co.uk/finance/economics/6917429/New-year-message-from-CBI-director-general-Richard-Lambert.html that was publishedon 01 Jan 2010