The Prime Minister has called on energy suppliers to follow British Gas in cancelling controversial rollover contracts for small firms.
British Gas announced last week that it was ditching the contracts, which have been blamed for locking unwary small companies into paying high energy prices.
The contracts start as low rate energy deals, but when the initial term expires, companies have a short window in which to cancel the contract. If they fail to do so they are automatically committed to a far more expensive long-term deal.
David Cameron welcomed the decision by energy giant British Gas, which has nearly one million business customers, to ban automatic rollover contracts for new business customers from September 1, adding that he hoped ‘other suppliers will rapidly follow suit’.
From June 1 next year British Gas will not move any customers, existing or new, on to an automatic rollover deal. In the meantime existing customers can avoid being moved on to a rollover contract by contacting the provider towards the end of their contract.
Stephen Beyron, managing director of British Gas Business, said: ‘Increasing numbers of our small business customers have told us they don’t like the way the energy industry automatically moves them on to new contracts, so we’ve decided we will lead the way and put an end to this practice.’
The announcement pre-empts a decision by energy regulator Ofgem on whether to introduce a total ban of auto-rollover contracts. It is consulting on measures to protect small firms, including a total ban, and is due to report back in the winter.
The move also means British Gas has stolen a march on its rival E.on, which just days ago called on all energy suppliers to ‘put an end’ to rollover contracts.
Yet at the time E.on refused to ban the contracts until a ban was adopted by all energy suppliers. It has confirmed it has no plans to ban such deals now either, despite British Gas’s move.
A spokesman said: ‘We believe this needs to be an industry-wide initiative to avoid further complexity for firms, which will be the case if all the providers are doing different things. We are not going to ban rollover contracts until the entire industry does. We don’t want to add to the confusion experienced by firms.’
But while British Gas’s decision may come as welcome news to many small firms, experts warn that the end of rollover contracts could mean some small firms paying even more, as there is no guarantee that the non-rollover rates set by British Gas will be any cheaper than their rollover rates.
Jonathan Elliot, of online energy broker Make It Cheaper, said: ‘What businesses should be aware of is that they won’t automatically end up on better tariffs if they do nothing.
‘However, by not being rolled over, it should at least make it easier for them to challenge their supplier – or shop around and switch – if they’re prepared to do so proactively.’