Energy deals confuse_2

10 November 2008
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10 November 2008

Small businesses have a "poor understanding" of energy contracts and the terms that stipulate when they are allowed to switch supplier or renegotiate contracts.

According to a report into energy supply by regulator Ofgem, information provided to small firms by vendors is insufficient and often not trusted. It added it was difficult for SMEs to find useful price comparison data and to know if advice they received from third party intermediaries (TPI) was unbiased.

There were concerns that TPIs, who advise businesses on energy buying and often receive commission from suppliers, are not transparent enough about how they are compensated.

An inquiry into whether the market was operating effectively was launched earlier this year (Web news, 22 February). Ofgem has proposed suppliers inform their customers in writing of terms and conditions for contracts and establish a code of practice to govern the switching process. The closing date for responses to the proposals is 1 December.

Meanwhile the CIPS Energy Group has written to Ofgem to ask what precautions it is taking to ensure a secure electricity supply this winter. Its letter said there is concern among buyers about the "fragile" nature of supply this winter: "I am writing to ask you what, if any, plans Ofgem has to 'keep the lights on'."

The group asked the regulator what it plans to do about the reduction in capacity and encouraging the building of new generation plants.

In its latest winter outlook, National Grid said demand would be met in full this winter, if stations were made available. It said there is around 25.4 per cent spare capacity, but others believe it could be as low as 16 per cent.


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