Stephen’s view on Ofgem’s announcement to keep auto-rollover contracts
Last week Ofgem announced the results of a consultation to improve the practice of auto-rollover energy contracts for business customers. I read this announcement with a sigh of despair. Auto-rollover contracts work by automatically locking you in for a period of time at the end of your contract if you don’t get in touch with your supplier to renew or change it at the end of its term. Since the first day I joined the energy industry in November 2012 I’ve been baffled as to why they are allowed to continue.
We were the first to announce an end to auto-rollover contracts over a year ago, and have long believed that the practice should be banned. But Ofgem decided to stop short of a ban and instead introduce further rules which increase the amount of information that suppliers must give to their customers.
We believe that the energy market would be fairer and more transparent without these contracts – which is precisely why we stopped the practice.
It is also hugely challenging for Britain’s businesses, who are rightly focused on growing out of difficult economic times, to navigate between suppliers who may or may not have banned these deals.
And we also believe that banning auto rollover contracts would promote switching which in turn would further improve competition in the market for the benefit of customers. This is exactly why the telecoms regulator Ofcom banned them for small business in the telecoms market back in 2011.
Of course, we welcome the proposed remedies, which will bring improvements. These improvements include:
• Stating customers’ annual consumption and current prices, as well as any relevant new prices, onto the renewal letter
• Suppliers also have to acknowledge receipt of a termination notice within five working days
• Customers should not have to give more than 30 days notice if they want to leave at the end of their contract.
These do go some way to help protect customers, and I’m pleased to say that we’ll have completed the implementation of all of these soon. But fundamentally we, alongside other suppliers and organisations like Citizens Advice, the Federation of Small Businesses and the Association of Convenience Stores still believe that a ban across the industry would provide the fairest outcome for customers. Speaking personally, I’ve never heard a credible argument as to why these contracts are a good idea for customers. People talk about needing them to avoid being put on “punitive” out of contract rates – well don’t put customers on those rates! A simple variable priced product at reasonable rates is all that’s required. I’ve never met a customer who’d prefer to be locked into a contract at higher prices than they originally signed up to without having explicitly agreed the details.
What is interesting and hopeful is that Ofgem has indicated in its announcement that it still has concerns, so much so that it has said they will review this situation in six months time. If auto-rollover contracts remain problematic for smaller businesses, it expects to propose a ban.
I do however wonder why Ofgem need to wait for voluntary (and thus not necessarily permanent) commitments by all Suppliers. I believe it already has the necessary evidence and support for a ban.