Just one in seven owners knows when energy deals expire, letting suppliers lock them in at inflated rates

One million firms risk being tricked into double fuel bills

UP TO a million small businesses could see their energy bills nearly double this year when they come to renew their contracts, despite falling fuel prices.

Every month about 90,000 business energy contracts expire, but many firms fail to realise this in time to cancel the contract or switch energy provider. If they receive no notification, providers can automatically renew the contract on a rollover basis, in most cases locking the business on to a far higher rate.

A survey by business price comparison website makeitcheaper.com found that 84 per cent of small businesses were unhappy with their current supplier, but only 14 per cent knew when their contract was due to end.

Most providers require businesses to give at least 90 days' notice before the end of an energy contract if they want to move elsewhere. ScottishPower recently changed the terms of its business contract so firms have a 'termination window' of between 90 days and 45 days before the end of their contract.

Failing to give notice in time can cost small businesses dear. This time last year tariffs were available from 7p per kilowatt-hour for business electricity and at 2.5p per kilowatt-hour for gas. However the sharp increase in wholesale prices in 2008 means renewal tar­iffs are typically 14p per kWh for electricity and 5p per kWh for gas.

Lisa Winterford, 40, is a personal assistant at the Garden Trellis Company, a lisa winterford of Garden Trellis Companygarden furniture man­ufacturer in Clacton-on-Sea, Essex. She organises the energy supply for the business.

Last month British Gas wrote to the firm warning that its two-year contract was due to end in April Unless notice was given by the manufacturer, British Gas said would automatically roll the business into a new contract.

With all of its workshop machinery, the Garden Trellis Company Uses about 50,OOOkWh of electricity a year, which has been costing about £5,000.

However, the rate given by British Gas for the new contract was 14.73p per kWh, up from the previous 8.17p per kWh, an increase which would cost the firm an extra £3,280 a year.

She has since given notice to British Gas in favour of a one-year contract with Scottish & Southern, with a rate of 9.06p per kWh.

She says: 'We use a lot of electricity and keeping costs down is essential. Thankfully we managed to get out of the contract in time because the proposed rise in unit rate would have been a vast increase for us.'

In fact, Lisa can count herself lucky. Many providers fail to notify firms that the contracts are due to expire or bury the information in the small print of a bill.

Using a broker or price comparison service may help businesses find a better deal, but experts warn firms to check how the brokers are paid and be aware of how this advice may add to the cost.

Financial Mail last year high­lighted how secret commissions totalling tens of millions of pounds are being paid to so-called 'inde­pendent' brokers by suppliers to pull in business from small and medium sized companies.

In some cases these commissions can amount to as much as 30 per cent of clients' annual bills

Acknowledgements
Article appeared in the Mail On Sunday Febuary 8th 2009
Edited by Helen Loveless