With energy prices sky high, it is essential to stop and think about whether you are getting a fair deal and if you could do better for your business. Businesses do not get the same protection or regulatory safeguards as domestic customers and some gas and electricity companies have unclear pricing policies, use underhand, questionable techniques and have ineffective complaints procedures.
If you are starting a new business, consider energy costs carefully even if it is just heat and light. Include energy in your financial business plan – energy prices are set to rocket still further and you need to have contingency plans. Don’t forget you can claim energy costs as a business expense.
You must contact the supplier who is registered to your business premises as soon as you move in. You do not have to stay with this supplier – get quotes and compare them with others. Make the suppliers work for you – get advice on the best type of contract to suit your needs. Don’t rush this process, or assume you will be disconnected if you do not sign up immediately, as it is important to get it right. However, longer term contract rates are cheaper, so you may be billed at deemed rates for the period between moving in and signing a contract.
Your energy contract is as important as all other contracts, so make sure you pay attention to the details and fine print. With very few exceptions, the law offers little protection to business customers. It assumes you know what you are doing. If a supplier agrees to make changes for you make sure it is put in writing, and check it is on the contract document before you sign. Before you sign, make sure you have read and understood the contract and ensure that it provides you with the services you require, are happy to agree to it and are satisfied it is the best you can obtain. Read the contract thoroughly and make a note of your obligations before signing it. Keep a copy of this and all bills and correspondence so you have something to refer back to.
Be on your guard against potential scams. Energywatch, the former energy watchdog (now Consumer Focus) warned that new and small businesses in particular are targeted in attempts to get new customers and earn commission. Scams include telling customers they have to sign up immediately or they will be disconnected, or pretending to be an independent government official offering to check the best deals. In reality these dodgy salespeople only represent one or two firms and then try to pass them off as the cheapest. Another con happens when a customer is switched to a new supplier without signing anything although they did receive a phone call from somebody offering a good deal and provided some information. Usually nothing was agreed, but the supplier switches the customer over anyway.
Before you give out any information to anyone who telephones or calls inviting you to change supplier, or before agreeing to anything at all, find out who the caller is, and take down the name, address and contact details of the person and organisation. Remember business consumers do not have a legal requirement for a cooling off period following signature of supply contract – once you have agreed you are committed. There are no price comparisons for business suppliers so do your own research or use a broker you trust. Most business supply contracts are for fixed periods usually between one and five years and there is usually a penalty for leaving early. Under some circumstances if you agree to switch suppliers on the phone or during a conversation this may constitute a legally binding contract even though you have not signed anything.
There are many different clauses that energy firms put into contracts – some allow them to increase prices whenever they want, some keep you on board by matching the best offer you get, but just because the energy price is low, it does not mean the lowest cost contract; you may be charged more for extras or other services It seems unfair that although small business energy use is very similar to domestic use, there is not the same amount of protection available. Until all energy companies follow best practice and deliver fair and clear contracts, better customer service and accurate timely bills, small companies need to keep their guard up, be vigilant and keep control of energy bills.
What to look out for in an energy contract
Know your rights and obligations before you sign a contract and in particular look out for the following:
Energy suppliers buy the energy they need on the wholesale market. Most short term contracts of one year are often on a fixed price. After that you are free to move to another supplier if you wish. (although there are cases of dubious suppliers tying a business into a contract for longer terms than the fixed rated by matching “best offer” prices). Longer-term contracts are usually on variable prices which can be changed by the supplier. You need to know how price increases will be calculated – if prices can change at will you don’t want to be locked into a lengthy contract. Some may just pass through extra wholesale costs. Make sure the price offered is inclusive of all charges and costs or whether there are other extras you have to pay for. Price is not everything, and extras can add considerably to the bill. Can you cancel without penalty if the price goes up?
Check how long the contract is for. If you sign up for a fixed period you are stuck until the period comes to an end. Longer contracts are often cheaper, but you are then committed. Check the contract carefully as some cost elements may not be fixed even thought the fuel cost and the length of contract may be. If you commit to a long term contract and are not happy with the price or service you really are stuck so think long and hard before signing up.
How often do you have to pay, will you be charged interest on late payments, and what happens if you dispute the bill? You can be cut off, although the supplier has to go to court before physically entering your premises to disconnect supply. Charges to reconnect can be substantial.
Who will maintain and read the meters? If you do meter readings yourself, check how often you must do this to fulfil your contractual obligations. Even if the supplier reads the meter, do you own readings and check you bills against them. Avoid contracts which say in the small print that you have to choose the meter operator – you have to pay for these services separately, rather than as part of the supply contract.
Penalties, costs and risks
Make sure you know when the supplier has the right to impose penalties. Give adequate notice to end a contract otherwise it might be automatically renewed.
Do you need to prove your credit worthiness or give a security deposit? Try to get credit references rather than giving out cash. How and when will you get a deposit back (many suppliers return a deposit after you establish a record of being a good payer).
What are your rights to get out of a contract? Can you do so if the supplier doesn’t keep their side of the bargain? You generally have few rights, but try to negotiate terms.