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Energy companies not business friendly

Written by Catherine Murray

Monday, 11 August 2008

Energy suppliers are failing to give companies a fair deal.

Energy suppliers are failing to provide businesses with the same fair and transparent service that domestic energy users are entitled to.

The British Chambers of Commerce (BCC) is urging Ofgem, the energy regulator, to ensure that their current probe into the energy industry addresses a number of serious flaws in the way energy companies deal with businesses.

This is in response to energy bills soaring and the economy heading into a sharp decline. English and Welsh water companies announced plans today to hike bills above the inflation rate.

The BCC is calling for a new, independent and dedicated watchdog to be established, which is specifically focussed on the energy concerns and needs of business.

This follows on from plans for consumer champion Energywatch to be amalgamated along with several other consumer groups from 1 October 2008.

An Energywatch analysis shows that they receive 32,000 calls from businesses seeking help and advice every year.

A new and dedicated business watchdog would ensure that this vital service is not lost in the creation of a single consumer group covering a range of industries.

When compared to domestic energy users, businesses are significantly more vulnerable to exploitation and unfair practice by energy firms.

Some of the key differences outlined by the BCC include:

The provision of pricing: whilst domestic suppliers are required to publish their tariffs for ease of comparison, for business suppliers, there is no regulatory requirement to do so.

The basic domestic contract allows people to switch every 28 days. Long term contract commitments for businesses are demanded for up to 5 years, which can be rolled over with little pre-warning.

Domestic energy users are entitled to a "cooling off" period on verbal contracts, however for businesses verbal contracts are immediately binding.

There is a one year restriction for back billing on domestic users, however, there is generally no such restriction for businesses.

Director General of the British Chambers of Commerce, David Frost, commented on the lack of adequate protection for businesses using energy suppliers

"With the economy slowing and energy bills on the rise, it is totally unacceptable that hard pressed businesses are left so open to exploitation by energy suppliers. Ofgem's investigation into the industry must hold the suppliers to account over the very apparent lack of transparency and fairness in their dealings with business,” he said.

Frost stressed, "Energywatch is currently providing a crucial service to thousands of businesses who are confused and frustrated by energy suppliers. If a 'super consumer group' is to be established, as the Government plans, there is little doubt in my mind that this service will be all but lost, leaving companies at the mercy of the suppliers.”

“An obvious solution would be establishing a separate watchdog, dedicated to assisting businesses,” he concluded.

A full list of the major disparities between domestic and business energy users is available below:

Domestic		Business
Provision of pricing Domestic suppliers are required by regulation to provide details of their tariffs, for ease of comparison upon request by any person. (Supply License Condition 22.7)	Yes	No	No regulatory requirement for business suppliers to do so. Contracts are bespoke, individually priced.
Right to change your mind Cooling off period on verbal contracts (from OFT Distance Selling Regulations)	Yes	No	Verbal contracts are immediately binding – no cooling off period.
Impartial price comparison information Many domestic price comparison services. Accreditation scheme for price comparison sites: energywatch Confidence Code ensures accurate, impartial and consistent advice to consumers.	Yes	No	Some independent price comparison sites. No Accreditation scheme.
Short term rolling contracts The basic domestic contract allows switching every 28 days. (License Condition)	Yes	No	Long term commitment through fixed term contracts 1-2 and up to 5 years long. Heavy reliance on contracts that renew automatically - “evergreen”.
Supplier Codes of Practice For sales and marketing (AES Code of Practice on Face to Face Marketing); Incorrect Transfer of Supplier (The Erroneous Transfer Customer Charter) and Billing (The Energy Retail Association Billing Code of Practice); Domestic disconnections are restricted by regulation	Yes	No	No industry self regulation of commercial conditions of supply: “caveat emptor”. For example, doorstep or distance selling are not bound by a Code of Practice.
Access to consumer protection e.g. Citizens Advice Bureau, Unfair Contract Terms Act.	Yes	No	Only recourse is the law courts. Ofgem assumes that small businesses can look after themselves.
Back billing restrictions Restricted to 1 year by the self regulatory code: Energy Retail Association Billing Code and individual suppliers’ codes.	Yes	No	Each case needs to be investigated individually in conjunction with the specific terms conditions of the consumer’s contract but generally there is no restriction.
Repayment Domestic suppliers must take into consideration consumer’s circumstances and ability to pay and make special arrangements for repayment. Options include weekly, fortnightly and monthly instalments and prepayment meters. (Supply License Condition 27).	Yes	No	Business suppliers are under no obligation to provide any repayment scheme no matter what the consumer’s circumstances are or how the debt balance has accrued.
Source: Energywatch