The UK faces a possible energy crisis due to oil prices and lack of infrastructure while energy companies report record profits. In an unstable world energy companies are hedging their bets by increasing their renewal rates to UK businesses.
From our experience the most common tactics for energy companies to increase customer revenue and retention will be experienced by companies in a number of ways.
A letter which was titled "Relax, you need do nothing, your rates protected" was filed by the manager of a textiles firm. On closer inspection the ‘protected rates' were an increase of 408% on their existing costs.
This reassuring letter was sent out a full five months before the contract ended. The letter was in fact the renewal with details and deadlines set deep in the text. The letter was filed until later as it was so far in the future. The deadline was missed.
A manufacturing company's quarterly electric bill went up 220% without their knowledge or permission. John Carter noticed a dramatic increase in his bill in April, the rates had gone up 220% in January. His supplier had rolled him into a two-year evergreen contract. They told him "It was all in the letter we sent you in September." No letter had ever been received. They said "No, Mr Carter, we can't do anything about the rates".
Marine Manufacturing received a gas renewal letter at the end of its three-year contract, when they tried to renegotiate they were told that the 150% increase was not negotiable. Why? Because letters are sent out after the termination deadline has passed.
The company was a profitable business until it was forced into a contract they did not agree to. "It's all in the terms and condition you signed three years ago". The last deal had been done over the phone and no one remembers ever seeing any T&Cs. "No I'm afraid we can't do anything about the rates".
A nursing home's electricity prices which went up after the first year of a three year ‘fixed price' contract. Bay View nursing home lost £2,000 to the new prices. When they pointed out that they had signed a fixed-price contract, the supplier said "We have changed our T&Cs; no, we can't change the rates and, no, you can't move to another supplier."
Research has shown that 60% of all UK SME sector businesses will be ‘rolled' into evergreen penal contracts more than once. Energy suppliers' contracts and billing are notoriously obscure and riddled with industry jargon. Contracts arranged over the phone by telesales departments are rarely followed up with paperwork and renewal policies are designed for maximum customer retention.
More than ever it is important that SME companies are vigilant with regards to their energy contracts. Energy suppliers are looking to the future and see considerable risks in the market, ie record oil prices, loss of our nuclear power stations. Renewal prices are reflecting the future risk and are carrying huge increases for the unwary.
In short: energy suppliers will penalise companies that are not experienced in procurement by imposing price increases of up to 408%. If you do not get the letter or fail to respond in the correct manner at the correct time, you will be locked into contracts of their choosing with no way of escape.
SME owners and directors need to either up-skill in the process of energy procurement or enlist professional help. A reliable consultancy that will track your contracts, notify and assist in terminations, and organise renewals to get you competitive rates should be seen as minimum requirement.
Richard Dormer is director of Business Switch. For more information on energy-related issues contact energy@BusinessSwitch.co.uk
