Business Electricity Consumers: Is Now The Time to Regulate the Automatically Renewing Contract

Automatically renewing contracts, otherwise known astoo busy trying to run their own business.' An indication
'evergreen' or 'rollover' contracts originated in the U.S.of the percentage increase over the existing contract
firstly as a convenience to cut down on the addedwould be far more informative.
administration for both parties of creating newFurthermore, not receiving such a notice cannot be
contracts annually and, in the case of services such asrelied upon as an excuse to invalidate the contract. As
insurance, to ensure continuous cover. The savingslong as the supplier has proof of posting it will be
made on administration by the service provider coulddeemed to have been received.
also be passed onto the customer by offering moreFrom what was originally conceived as a new type of
competitive rates and invariably the contract wouldcontract to make life easier for both parties we are
include a direct debit mandate. Both parties werenow left with agreements tipped wholly in favour of
happy - the customer had lower rates and less hassle.the supplier.
The provider had a captive customer who, so long asElectricity4Business' Marketing Director Graham Paul
prices continued to be reasonable, would remain loyal.argues that truly competitive suppliers are being locked
The icing on the cake was the guaranteed regularout of a large part of the market despite offering
payment.cheaper prices and far more favourable terms. 'If we
Then along came the newly de-regulated utilities whocan offer some of the cheapest business electricity
similarly identified real advantages in the evergreenprices in the market' says Paul 'whilst maintaining the
contract both for themselves and for their customers.customer's choice to move should he so wish then
And whilst prices remained fairly stable both partiesthose who are renewing customers at rates twice as
remained happy.much as ours should at least allow the customer to
However, prices of utilities such as gas and electricitymake his own decision.'
are prone to wide fluctuations depending on aBut there is light at the end of the tunnel since it's often
multitude of factors and when this happens thesaid that what happens in the U.S. is mirrored in the
attraction of the evergreen contract for the customerU.K. after a short period.
begins to wane.Some U.S. states, amongst them the powerful State
Previous inertia is replaced by shear panic when theof New York, have sought to redress the balance with
customer suddenly learns that the annual electricity billevergreen contracts by imposing strict controls on their
is doubling and that the evergreen contract preventsterms and conditions. New York General Obligations
him from switching to a far more reasonable rate fromLaw 5-903 prohibits the automatic renewal of
a competitor, thus stifling the competition thatcontracts unless the customer is provided with notice
de-regulation was supposed to promote.by certified mail at least 15 days and not more than 30
Not all the blame can be laid at the supplier's door asdays prior to the time specified.
he is also subject to the irregularities of the wholesaleThe state of Alberta in Canada protects the customer
market and can ill afford a mass exodus when readystill further. The first bill you receive after the contract
to negotiate forward the next round of energy deals.has been renewed must clearly and prominently state
However, the supplier is responsible for drafting thethat the marketing contract has been renewed and
terms and conditions upon which the evergreenstate the price you will be charged for your supply of
contract is based and it is these terms and conditionsenergy. You have 30 days after receiving this first bill
that will determine just how reasonable the contract is.to cancel the renewed contract without cost or
Post de-regulation new entrants to the UK market,penalty.
Enron Direct, a subsidiary of the infamous AmericanEnergywatch, the U.K. regulator, is now clearly onto the
energy giant which collapsed in 2001, brought withcase. Following complaints from many small
them evergreen contracts with terms and conditionsbusinesses it wants to ensure that where evergreen
which later some prominent North American statescontracts are chosen 'that these commercial
were to challenge.arrangements are fair and clear and do not have the
Alas, this set the standard for many other supplierseffect of preventing consumers from moving supplier
and the U.K. is now littered with contracts where:at the end of a contract where they choose to do so.
- 90 days cancellation notice is required prior to theWe are concerned that this trend is having the effect
contract end date to avoid rolloverof further reducing consumer choice.'
- cancellation is only accepted by phone which isFor this reason Energywatch has sent a full
subsequently unverifiable and may discriminate againstquestionnaire to all business suppliers requesting their
the hard of hearingresponse to a series of questions relating to this issue
- customers are not informed of the new rates until italong with copies of their full terms and conditions.
is already too late to avoid the rolloverResponses are required by early November 2006
As if this weren't enough, the customer is often furtherafter which Energywatch will evaluate the responses
disadvantaged by the way in which notice of a priceand propose a set of guidelines for suppliers which will
increase is delivered, if indeed it is delivered at all.cover supplier processes, consumer communications
Typically, the supplier will not give any indication of theand contract terms.
enormity of the price increase but simply give a newHere is a true opportunity for Energywatch to show its
figure in pence per unit which can be very confusingteeth. Anything less than the outcomes cited above in
for the average small business. Mark Todd of Energythe U.S. and Canada will surely be letting the U.K. small
Helpline claims that '...in many cases customers simplybusiness down.
accept the price hike through inertia because they're