There were ten in the bed and the little one said, “Rollover!”
It’s a nursery rhyme from childhood which somewhat bizarrely fits the energy world except that we have more than ten suppliers in the bed and rollovers – the process of suppliers automatically whacking business customers onto new contracts as their tariffs ends – are rather less cuddly than being pushed out of bed.
Rollovers have been pushed into the spotlight over the last week with British Gas today promising to ditch them for its business customers and E.ON last week calling for fellow suppliers to scrap the practice.
Energy watchdog Ofgem happens to be giving the process a sharp once-over because all too often these new contracts are more expensive (by 30% on average) than the previous one. This has led to a yearly overspend of £2billion in the UK, according to calculations by energy supplier CNG.
Whatever happened to rewarding customer loyalty?
SMEs have been forced to find their own rewards, by questioning suppliers, seeing what competitors are doing and getting advice from third party intermediaries (TPIs).
Ofgem wants to make this task easier – and one idea it put forward on the rollover dilemma is to outlaw them completely.
Could outright ban on rollovers push up energy prices?
An outright ban previously proved unpopular with suppliers and Ofgem had seemed to be steering away from the idea. Though from a consumer perspective it seems like a great idea on face value, in reality it’s not the ideal solution.
A less stable customer base for suppliers could lead them to increase their tariffs, a hedging strategy of their own, which in turn could end up with price rises for all their customers – and nobody’s asking to pay more here.
Is the next best course of action a compromise? Say, restrictions on the conditions under which suppliers can automatically rollover contracts and a limit put to the rollover period (typically 12 months).
Rollover rolled over
Part of the Retail Market Reform (RMR) proposals from Ofgem include new rules in which suppliers will have to clearly show the contract end date (CED) and the notice deadline for changing supplier.
This is one of the fundamental calls to action – and you’d have thought Ofgem would rush to get it in place sooner rather than later. Apparently not.
Two weeks ago it was quietly announced this rule will be pushed back to 31 March 2014… Why? Because extra information on bills needs ‘significant changes to billing systems and customer communication’ says Ofgem.
This hasn’t gone down well with some. As Jonathan Elliott of Make It Cheaper puts it, “We see the introduction of contract end dates and notice periods on business energy bills as a big step forward in reducing rollovers and so we’re obviously disappointed that the move has been further delayed”.
Light at the tunnel – but is that a train coming?
Things are looking up in some corners of the market already though: a couple of suppliers such as E.ON and CNG have taken the initiative and already print CEDs and renewal dates on customer bills.
Hurrah! Let’s hope these examples set the benchmark for the other Big Six & independent suppliers, so they all rollover and do the same before Ofgem imposes a blanket rule which could face further setbacks anyway if suppliers get the Competition Commission involved. That would set back the retail market review even longer.
Then they can all stop bed sharing and that’s a lot better for all of us!
Christan Foden is ELN’s Business Development Manager.