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When it’s important to switch contracts: Don’t get taken for a ride

Currently, energy suppliers must notify clients when a plan is drawing to a close. The provider must give 42-49 days’ notice, and if the client doesn’t get in touch to switch or renegotiate the deal, then it can rollover the contract.
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Understanding how and when to switch contracts can save your business money – even if you’re happy with your provider.

In recent years, many small businesses have been lumbered with expensive and confusing rollover contracts.

The outlook is no longer quite so dismal following intervention from Ofgem, but it is still important for business owners to get a handle on contracts and make a note of when there’s next an opportunity to switch.

Currently, energy suppliers must notify clients when a plan is drawing to a close. The provider must give 42-49 days’ notice, and if the client doesn’t get in touch to switch contracts or renegotiate the deal, then it can rollover the contract.

Ofgem reports that around 82 per cent of businesses with fixed-term contracts know when the switching window is – 59 per cent know exactly, and 23 per cent know approximately.

“We have several premises and we do switch as it does make a difference, but the tariffs are confusing and you need to have your wits about you,” warned Liz Storey from Ignite Business Enterprise.

“It’s a hugely competitive market with lots vying for your business, but a little time and a huge amount of patience can save you money.”

Don’t rest on your laurels

It’s fairly typical for growing business employees to wear many hats, and it might not always be clear who’s in charge of provider contracts.

With no specific facilities manager, the temptation may be to just let a contract roll over – if you got a cheap plan in the first place and you’re happy with your service, why bother wasting all that time trawling through new contract plans?

Unfortunately, even if you’re happy with your plan you’re unlikely to be rolled over onto the same one. You may have signed up to a cheap-rate, but get rolled over onto a standard tariff that ends up costing your business more.

For this reason, when you get that notice of your switching window, it is nearly always worth looking into other plans.

However, switching doesn’t always have to mean switching provider – you can also take advantage of your switching window to renegotiate deals with your current supplier.

Ofgem reports that there has been a recent shift away from rolled over contracts towards renegotiated contracts with existing suppliers. This is more likely to be the case for businesses that use a higher than average amount of energy, which makes sense given the correlation with cost.

Businesses spend on average around £4,000 a year on mains electricity, which accounts for an average 14 per cent of operating costs. Mains gas is lower, but still significant, at just under £3,000 year on average.

Switch contracts with ease

With easy access to suppliers’ website and tariffs and the obligatory notice of the switching window, it is easier than ever for businesses to get on top of energy contracts.

Ofgem found that nearly two thirds of all businesses have switched energy suppliers in the last five years, and that the proportion of all businesses that have switched in the last year has increased slightly (23 per cent in 2014 to 25 per cent in 2015).

This shows business owners are getting to grips with the industry, and making it work for them. In addition, overall views of the switching process have been positive, with 61 per cent of businesses claiming that the switching process was easy.

While your supplier will send notice, it doesn’t hurt to keep track of when your energy contract will end yourself and start shopping around in advance. That way, when your switching window arrives, you should have a good idea of whether you want to switch contracts or renegotiate your tariff.

Switching is a great way to make sure your business is getting the best value for money, and doesn’t get taken for a ride.

Overall, you might be surprised how affordable going green is – and in the long run, it might end up being a boon to your business, and your reputation.

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About Author

Letitia Booty

Letitia Booty is a special projects journalist for Real Business. She has a BA in english literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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