British Gas is to end the process of automatically rolling-over contracts for its business customers, in a move that could signal the beginning of the end for the controversial tariff structure.

Sales of automatic roll-over contracts will cease from the beginning of September, while the company will start a new process for renewing the contracts of existing customers from June 2014 – making it the first company to formally abandon the practice.

Unfair practice

Automatic roll-over contracts, which see business customers automatically signed up to a long-term deal after a fixed contract ends, are widely used throughout the industry, but many customers feel that this practice is unfair, as it does not offer companies the chance to change or negotiate a more flexible arrangement.

Indeed, another energy supplier, E.ON, found that 86% of its small business customers were unhappy with the automatic roll-over arrangement, and would prefer to negotiate a new contract or move to a more flexible agreement rather than being automatically place on a fixed-term deal.

Renewal options

From June 2014, existing British Gas customers will be offered renewal options that require the customer to make a choice about which tariff they would like to sign up to, and which will not include another automatic fixed-term contract.

Customers will be able to choose from a range of fixed-term or variable options, British Gas’ owner, Centrica, said, adding that existing customers who reach the end of their contracts before June 2014 will be able to move to a non-rollover contract if they contact British Gas to discuss their renewal.

“Increasing numbers of our small business customers have told us they don’t like the way the energy industry automatically moves them onto new contracts, so we’ve decided we will lead the way and put an end to this practice for our customers,” said Stephen Beynon, managing director of British Gas Business.

The move was welcomed by the government, with Prime Minister David Cameron calling on the remaining five of the UK’s biggest six suppliers to follow Centrica’s lead.

However, while E.ON joined the calls for the industry to abandon automatic roll-overs, it has not gone so far as to do so itself, saying that the industry needs to take a collaborative approach.

“If this is going to work the industry and the regulator have to work together and create a level playing field, offering clarity, consistency and simplicity for customers,” said Anthony Ainsworth, E.ON’s sales and marketing director. “For any one supplier to act alone risks layering greater complexity on to an already confusing situation.”

The word from Lord Rupert Redesdale

Meanwhile, Lord Rupert Redesdale, CEO of the Energy Managers Association (EMA) told Energy Demand that the EMA wholeheartedly supported the move to end automatic roll-overs. However he warned that businesses still need to work on cutting their energy use, and pointed to the training courses currently being developed by the EMA’s sister organisation the Carbon Management Association (CMA), to enhance staff knowledge about energy use.

“The EMA supports any initiative that gives flexibility to businesses to manage their energy bills,” he said. “The problem is that many SMEs don’t have the knowledge base to manage their energy bill. That’s why the CMA is making sure that there will be courses on tariff structure available.  The point is – it’s not just about price, it’s about use.  We need to train people to use less.”