New measures to make it easier for micro-businesses to shop around for better energy deals could save them up to £180 million a year
From this week, the Competition and Markets Authority (CMA) has ordered energy suppliers to stop locking small firms into automatic rollover contracts and make it easier for them to compare prices.
A two-year investigation into the energy market by the CMA found that 45% of UK micro-businesses were stuck on expensive default tariffs.
The report revealed that energy suppliers only published a full list of available tariffs for domestic customers, so it was more difficult for micro-businesses to compare and switch energy deals than for households.
In addition, automatic rollover clauses meant that if a fixed-term contract was not terminated or renegotiated before its end date, then some contracts would automatically continue, often at a higher tariff and with termination fees and no-exit clauses that made it expensive to switch.
Roger Witcomb, chairman of the investigation, said: "Small businesses rely on keeping overheads down to survive, so to find that nearly half of the micro-businesses across the country were on pricey default deals was worrying. That's why the CMA ordered energy suppliers to stop automatically rolling small business customers onto fixed-term tariffs and to help their customers more easily find information on the deals available. These, alongside 30 other measures resulting from the investigation, will help energy customers make sure they are on the most competitive deal in future."
Mike Cherry, national chairman at the Federation of Small Businesses (FSB), called the reforms "a step in the right direction." He said: "For too long, many small businesses have had a raw deal in the energy market."
Dermot Nolan, Ofgem chief executive, said: "This is a big change in the way the market works. Micro-businesses will also be able to leave more expensive auto-rollover default tariffs without paying an exit fee, freeing them to switch to a better deal."
Mike Spicer, director of economics at the British Chambers of Commerce (BCC), said: "Businesses, like residential users, can save significant amounts by testing the market for their energy. The remedies announced by the CMA, particularly the halt on automatically rolling companies onto fixed-term tariffs, will help ensure that fewer are paying more than they should."