How and when rollover contracts can affect energy prices for commercial businesses

In the coming winter months, industrial and commercial businesses will probably receive some hefty energy bills. As a business stakeholder, this may prompt a reevaluation of your energy supplier in an effort to reduce your energy costs. The beginning of the year could be the best opportunity for you to look at your current contract, take note of your renewal date and see if your business energy supplier is still providing you with the best deal.

Many fixed energy contracts will come up for renewal in April. If this is the case for your business, a contract renewal letter will likely be sent to you in early February. These contract renewal letters are issued by suppliers and include a variety of contractual obligations. The terms will very likely be different from your original agreement. These “rollover” contracts are renewed automatically unless you serve your supplier with a valid termination notice. When your contract renewal letter arrives, your business has three options: do nothing, switch, or negotiate a new contract with your current supplier.

More often than not, businesses will do nothing. This is undoubtedly the most costly option. Your energy contract will be “rolled over” into a new annual contract at an uncompetitive price. The terms may also be extended to a period of 1 to 3 years, resulting in your business paying far more, for far longer, on energy than it was previously.

If you’re thinking of switching energy suppliers, you need to know the window of time you have to give notice to your current supplier, usually 1 month or 3 months prior to your renewal date. It’s good to note that getting a jump-start on supplier quotes will help you save money, as the demand will not be as high. Our market research from 2011 shows a 1.8% rise in wholesale electricity prices in the months leading up to April contracts renewals. This caused a knock-on effect on the quoted retail market price.

The third option is to negotiate with your existing supplier or ask them for a price for a new contract. This will result in better rates, although perhaps not the very best.

The main thing businesses should remember is to serve notice before the contract expires, this ensures you have all options available and avoid the rollover trap when you reach your contract renewal window. By exercising this notice, your business gets the choice between switching suppliers or receiving a new, competitive offer from your current supplier. If that notice is not given, you are stuck with whatever price your existing energy supplier chooses to charge for a term of their choosing.

Being informed and having someone on your side will help you stay on top of current contract policies and how they affect your business. As an independent brokerage, Nationwide Utilities can work closely with you to help you receive the very best energy rates and navigate through the your contract renewal process, no matter what stage of your contract process you may be in.

To receive a bespoke business energy analysis enquire here or call us on 0800 862 0861.

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One Response to How and when rollover contracts can affect energy prices for commercial businesses

  1. Senior Energy Broker says:

    Energy watchdog Ofgem is beginning to clampdown on business energy suppliers, recommending plans to help UK businesses change their energy supplier with more ease. The proposed regulations do not make a distinction between an independent broker and a supplier-side agent who employs staff on a commission basis – with little monitoring – often using very questionable sales tactics such as verbal contracts.

    Alex Pinna, Director of Nationwide Utilities has said that Ofgem needs to focus on tightening up the renewal process instead of lobbying for rights to take enforcement action against independent brokers and consultants because these independent third parties generally do not contract directly with the consumer; they rely on suppliers to facilitate that. The only way to regulate and ensure contracts are being created and renewed ethically is via the supplier. Until Ofgem addresses roll over contracts more thoroughly, Pinna suggests suppliers offer a “roll over opt-out” option upon signing, a practice that is already being adopted by at least one of the ‘Big Six’ energy suppliers.

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