Energy contracts for business
Micro business contracts
Do micro business contracts differ from other business contracts?
So that the smallest firms know when they can compare the market, we require suppliers to put the end date and notice period on all bills for fixed term contracts. We also allow smaller businesses to tell their supplier they want to switch at the end of their deal at any time before the notice period.
Now we want to go further by introducing a standard 30-day notice period for all contracts for these businesses. We expect this to come into force from 31 December 2014. We will also set new rules for suppliers to tell the smallest firms how much energy they use each year, and give them details on how the price of their current deal compares with the new rates suppliers offer for fixed term contracts. Having this information puts these businesses in the best possible position for negotiating a new deal when their current contract ends. We expect these changes to be in place in March 2015.
What information will my company need to provide to prove it is a micro business?
There are around 1.6 million micro-business energy consumers in Britain. Your company is a micro business if it meets one of the following criteria:
- employs fewer than 10 employees (or their full time equivalent) and has an annual turnover or balance sheet no greater than €2 million, or
- consumes not more than 100,000 kWh of electricity per year, or
- consumes not more than 293,000 kWh of gas per year.
If your business uses this much energy it should equate to an annual spend of around £10,000 per fuel (excl. VAT and Climate Change Levy).
If your supplier does not have the full information about your business you may be asked for information on the number of employees (full-time equivalent), the turnover and energy consumption. Your supplier is required to take all reasonable steps to identify whether you are a micro business or may decide to automatically treat you as a micro business.
My supplier decided my business does not qualify as a micro business, but I think it does. What can I do?
In the first instance you should approach your supplier with the supporting evidence that you do qualify. Your evidence should include number of employees and annual turnover or consumption. You should also remind them of their obligation to take all reasonable steps to identify whether you are a micro business.
My contract has been rolled over without my consent. Why is this?
If you failed to tell your supplier of your intention to end a contract before the notice period, it is possible your supplier has rolled you over onto a new contract. For micro businesses we only allow suppliers to rollover a contract for a maximum period of one year.
What should I look out for when entering into new contracts?
- consider what energy contract is suitable for your business needs, shop around and compare suppliers’ offers. Read the section on switching for advice on how to do this
- make sure you understand the key aspects of your contract
- read the full Terms and Conditions of your contract when you receive them and the Statement of Renewal Terms. Keep them for future reference
- keep copies of all correspondence, in case of any disputes with your supplier.
What is a deemed contract?
A deemed contract is normally in place when any type of customer moves into new premises and starts to consume gas, electricity, or both, without agreeing a contract with a supplier. A deemed contract may also exist where an existing contract comes to an end but the customer continues to consume energy. This second possibility could arise in two ways:
1. If a contract is terminated (by either the supplier or the customer) but the supplier continues to supply the customer, there is likely to be a deemed contract if:
- the original contract does not expressly say what will happen after termination. For example, if it does not say that the original contract terms must apply when you are ‘out of contract’
- the existing customer continues to consume gas, electricity, or both at the premises
2. Where a contract expires but the customer is still using gas, electricity, or both from the same supplier, a deemed contract is likely to exist if:
- the original contract does not expressly say what will happen after expiry, (eg it does not contain renewal provisions or state that the original terms still apply)
- the existing customer has told the supplier that they don’t want the original contract to continue.
Around 10% of micro-businesses are on deemed contracts. It’s vital that they are aware that prices on these contracts are on average 80 per cent more than rates charged in a negotiated contract. If you are on a deemed contract you should shop around and compare supplier offers for a new energy contract, as you could make significant savings.
Your rights when you are on a deemed contract
If you start taking supply on a deemed contract, your supplier must:
- take all reasonable steps to provide you with the Principal Terms of the deemed contract including the charges or fees
- provide you with a copy of the full contract if you ask for it
- take all reasonable steps to tell you about other available contracts and how you can get information on these
- take all reasonable steps to ensure that the terms of its deemed contract are not unduly onerous.
If you are a business customer using energy on a deemed contract, the supplier cannot:
- prevent you from switching to another supplier, for any reason or at any time, (ie they cannot object to you transferring for reasons of debt or contract)
- require you to give notice before terminating the contract or charge you a termination fee.
For more informataion see the full electricity supply licence conditions, setting out the terms relating to deemed contracts.