Extortionate Rollover Contracts Must Be Abolished

ACS has called on Ofgem to introduce an outright ban on automatic rollover contracts to stop suppliers taking advantage of their small business customers.

In its submission to the Non Domestic Automatic Rollovers consultation, ACS states that the current rules surrounding rollover contracts do not work and can lead to retailers ending up on rates that are significantly higher than new contract rates. While Ofgem’s proposed measures (detailed below) are welcome to introduce more transparency in the market and improve communication with retailers, they do not go far enough.

Ofgem’s proposals on rollover contracts include:

  • Shortening the maximum termination notice period that a business customer has to give to a supplier to 30 days (previously between 30-90 days, depending on supplier).
  • New rules for suppliers to include their current and renewal prices and their annual consumption on renewal letters
  • Requiring suppliers to acknowledge receipt of a termination notice

Some suppliers have already moved to stop rollover contracts in their business. ACS has welcomed recent announcements from E.ON, British Gas and others which outline their plans to stop the use of rollovers. However, there are currently no plans to introduce a ban for all suppliers.

ACS Chief Executive James Lowman said: “The Retail Market Review has been ongoing for several years, and while there has been progress toward a fairer market for small businesses we do not believe that Ofgem have gone far enough to protect local shops. Current rules on rollovers allow suppliers to take advantage of their customers by putting them on extortionate rates for their energy consumption. We do not believe that this is indicative of a fair energy market, and are calling on Ofgem to abolish rollover contracts.”

ACS has also called for further action on the issue of deemed rates. In its consultation, Ofgem note that deemed rates can be up to 82% higher than an equivalent acquisition contract but have opted to take no action, referring to a licence condition that states that these rates must not be ‘unduly onerous’.

Mr Lowman continued: “Energy rates that are more than 80% higher than acquisition rates are outrageous and Ofgem must act to stop energy suppliers abusing their position in this way.”

The full submission can be found in the Lobbying section of the ACS website.

This entry was posted by Chris on Fri, 11/04/2014 - 09:00