- Auditel Consultant:
- Peter Harrison
Rollover Energy Contracts and how to avoid them
08 Mar 2010 | Filed under: UtilitiesRead on if you want to save your business thousands of pounds over the next few years!
Okay that sounds a bit dramatic, but it’s no joke if you get caught out by a rollover contract on your business electricity or gas. Ofgem have recently been trying to ban this sharp industry practice, but their best efforts have been watered down by the energy suppliers who view rollovers as a primary form of customer retention! It’s simply not in their own interests to make it simple and transparent for their customers to shop around for the best prices at contract renewal time.
What is a rollover contract? As the name suggests, it’s an automatic default extension to your energy supply contract when your current fixed price contract ends. If you do nothing at the end of your contract you will, in most cases, be automatically locked into a new rollover contract for anything up to a further 3 years. The worst part is that you will have no control over the revised rollover contract prices, which I can assure you will be most uncompetitive. It’s extremely frustrating when I find a new client locked into one of these rollover contracts for several years. If often costs them many thousands of pounds and in some cases tens of thousands.
Chances are you probably won’t even notice a rollover has even happened and be blissfully unaware of the money you could have saved by following best practice during the contract renewal process. If you’re lucky you might have received a benign looking contract renewal offer with the message “no action required” prominently displayed. Then again you might well have received nothing at all, but the contract will still legally roll over regardless unless you take action at the appropriate time.
So what’s the big deal about a rollover contract? Why bother taking any action if you are receiving good service and have no intention of switching supplier? The simple answer is PRICING. If you show complacency toward your energy supplier they will, without a doubt, take advantage and hike their prices as high as they think they can get away with. Standard renewal offers are rarely competitive and even less so if you have a history of accepting them without question. Your tendency to maintain the status quo is known as “inertia” and it allows the supplier to increase their prices due to your complacency. It’s not uncommon for a business to be paying more than twice the competitive rate for their energy and be legally locked into those prices for several years. The eye opener for me is that they are often unaware that their prices are uncompetitive in the first place. What is the going rate for a kWh of electricity today? Is it 1p, 5p, 10p, 50p?
So how do you avoid a rollover contract and ensure your prices are competitive, even if you have no intention of switching supplier? The answer is quite simple on the face of it. But in practice there is a minefield out there, deliberately designed to catch you out at every step. To cut a long story short, approaching the end of your existing contract you need to terminate the contract by following the detailed procedure buried deep in the small print of your contract T&Cs. Typically this will mean serving written notice of contract termination anything up to 120 days before the contract end date. It’s very important to do this even if you intend to stay with your current supplier. Failure to terminate the existing contract within the timescale specified in the T&Cs will inevitably lock you into a rollover contract for at least another year and there’s little you can do about it. Once the contract termination has been served you can then start to shop around for the continued supply, including your existing supplier, who will now by magic suddenly become much more competitive!! There are many tricks that suppliers use to catch you out during a contract renewal, but I’ll save those for future blogs.
If you have better things do (and I’m sure you have) than trawl through obscure contract T&Cs and lock horns with cunning energy suppliers, you can always get Auditel to do it for you. We know all the tricks and how to avoid the pitfalls. We also use our collective buying power to obtain the best commission free pricing from all UK energy providers. Plus it won’t cost you a penny as we only get paid by sharing the savings we find for you. Also feel free to call or email if you want any impartial advice on this topic. I’m on a mission to prevent rollovers so I’ll help you if I can!
PS: This important advice applies equally to ALL UK energy suppliers and don’t expect the big household names to make life easier for you. Energy supply is a very hard nosed business, but pricing can be very competitive if you play your cards at the right time.
5 Responses to “Rollover Energy Contracts and how to avoid them”
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- Rollover Energy Contracts and how to avoid them
Its not just energy contracts, the new BT business one phone contract I have just signed to has a nasty rollover clause buried deep in the terms and conditions, which they dont tell you about. Miss the 5 week window for cancellation 2 years out and you get signed up for a further 24 months !
Too true Nick, Telco contracts can be just as bad although they don’t tend to double their prices for no real reason.
Is there any way of getting out of an auto renewal? We have been caught despite the fact that we did not receive a renewal letter. I also notice that British Gas require notice to be given by recorded delivery, but they don’t send their renewal letters out recorded delivery! What about unfair terms and conditions legislation? Why isn’t the regulator doing something?
Unfortunately Stuart this is an all too common situation. Although you may never have received the renewal letter, British Gas will almost certainly have a copy of the letter on file which they will claim was sent out. These letters often go ‘missing’, but as you say they are not required to send recorded delivery so it’s just your word against their’s. But in any case the onus is still on the customer to serve notice of termination under the terms and conditions of the contract. I’ve discussed this at length with a solicitor specialising in contract law and his view is that the cost and risk of taking them to court is only worthwhile if there are significant sums involved. But it is worth pursuing them through British Gas customer complaints, particularly with a well worded letter from a solicitor. I’ve won a couple of cases recently on behalf of my clients using this approach. The regulator has been trying, unsuccessfully, to ban this kind of practice for years and the introduction of ‘micro-business’ rules is their latest attempt to at least protect small businesses from unfair roll-over terms. But in reality, it has just made the renewal process more complicated without providing any real protection. It’s also worth pointing out that pretty much all energy suppliers, not just British Gas, have similar roll-over terms in their standard contracts.
Stuart, we are currently researching customer experiences with energy supplies and would be keen to learn more about your experience either via a brief (15 minute) telephone call or en exchange of emails. All results of the research are anonymous and entirely confidential. Please let me know if you’d be interested in sharing your story with us by emailing me on thomas.andrews@sensatamarketing.com. Thanks and regards, Tom.