The Energy Advice Line has thrown its support behind legislation aimed at stopping energy companies automatically rolling businesses over onto expensive new energy contracts.
The UK’s leading business electricity price comparison and switching service has endorsed a private members Bill put forward last week by MP Caroline Lucas aimed at making the practice illegal.
The Energy Advice Line has long campaigned for energy regulator Ofgem to ban rollover contracts, whereby suppliers lock firms into un-negiotiated and expensive energy contracts for a full 12 months without consultation.
“It’s a pernicious practice and we deal with business electricity users every day who have ended up paying thousands of pounds more for their energy than they need to as a result,” Mr Morgan said.
“When a fixed-price energy contract comes to an end, many businesses have a very small window of opportunity to give notice to their supplier that are leaving to take up a cheaper deal with another company.
“If this happens, they can automatically be rolled over onto an expensive contract that is often 30% more expensive, and sometimes even more than that, than the going retail price.
“By the time a business electricity user realizes what’s happened it’s too late and they are stuck in this contract paying much more than they need to for a full 12 months.
“Despite repeated calls from us and business groups, suppliers have refused to stop the practice. It’s long overdue for Ofgem or the government to step in and make it illegal.”
The Green Party’s Caroline Lucas has tabled the Micro Business and Energy Contract Rollover Bill, which would allow very small business electricity users to escape from these expensive rollover contracts after 30 days.
According to research by the Federation of Small Business (FSB), 25% of small firms have been rolled over on to a new energy contract without their knowledge. More than 80% of those questioned said they would support the abolition of rollover contracts.
Mr Morgan said many firms, in particular the smallest organisations, often were unaware that the terms of their business electricity contracts required them to give notice to their supplier within a fixed time frame.
“Suppliers simply take advantage of this fact and firms need protection from such an unfair practice,” Mr Morgan said.
“Ofgem signaled that it would crack down on this some years ago but to date has done nothing.”
Ms Lucas said: “With the rising cost of energy now a make or break issue for many small firms, it’s time to hold the energy giants to account for the damaging practice of contract rollovers that delivers a bad deal for micro businesses.
“It’s deeply unfair that, while micro businesses often consume products and services in a similar way to domestic consumers, they do not enjoy the same level of regulatory protection.
“This leaves them vulnerable to being ‘rolled over’ from their current energy contract into a new one without their knowledge – making it impossible for them to negotiate a better deal for another 12 months.
“My private member’s bill is about asking the Government to act to ensure the energy regulator finally delivers on its promise – and stands up for the UK’s micro businesses.”
The bill is scheduled to be debated by MPs on March 1.
The Energy Advice Line offers help and advice to firms of all sizes about how to save money on their business energy bills. The online service allows firms to input their details and with just a few computer strokes generate the five best energy quotes from a wide-ranging panel of business energy suppliers.
It also offers a free contract management service to help with ongoing questions or problems with the contract or energy supplier.
For further information about the Energy Advice Line’s services, or to obtain quotes or advice, visit www.energyadviceline.org.uk