Energy firms failing to provide businesses with fair deal
11/08/08 | 00:01
Energy suppliers are failing to provide businesses with the same fair and transparent service that domestic energy users are entitled to.
With energy bills soaring and the economy in a sharp decline, 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.
Furthermore, with the consumer champion Energywatch set to be amalgamated along with several other consumer groups from October 1, 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. 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 include:
- On 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; for businesses long term contract commitments 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; 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.
Commenting on the lack of adequate protection for businesses using energy suppliers, Director General of the British Chambers of Commerce, David Frost, said:
"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.
"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."
Ends
Media Contacts:
Fiona Cunningham
Tel: 020 7654 5812
Email: f.cunningham@britishchambers.org.uk
OR
Sam Turvey
Tel: 020 7654 5813
Email: s.turvey@britishchambers.org.uk
Notes to Editors:
List of major disparities between domestic and business energy users:
|
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) |
√ |
X |
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) |
√ |
X |
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. |
√ |
X |
Some independent price comparison sites.
No Accreditation scheme. |
|
Short term rolling contracts
The basic domestic contract allows switching every 28 days. (License Condition) |
√ |
X |
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 |
√ |
X |
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. |
√ |
X |
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. |
√ |
X |
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). |
√ |
X |
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
* The Government plans to create Consumer Focus.
The British Chambers of Commerce (BCC) is the National Voice of Local Business.
The BCC sits at the heart of a powerful nationwide network of Accredited Chambers of Commerce serving business across the UK, which employ over five million people.