New rules governing how energy suppliers manage their SME customers have come into force, as part of regulator Ofgem’s efforts to provide smaller businesses with more protection in the energy market.

Ofgem’s new Standards of Conduct requires suppliers to treat small business – defined as firms spending up to £10,000 per year on each fuel– fairly when they are billing and contracting and when the firms switch suppliers.

The regulator is also extending to these SMEs two protections previously limited to business customers spending less than £5,000 per year per fuel: the one-year limit on automatic rollover contracts, which will come into force from the end of March 2014, and mandatory access for businesses to clear information about supply contracts. The extensions will allow an additional 160,000 companies to benefit from the protections, Ofgem said, and allow SMEs to shop around for better deals.

The new rules also require suppliers to act quickly to rectify mistakes, and to make businesses fully aware of contract terms and conditions. And, from the end of March 2014 suppliers will have to accept a termination notice at any time before the 90-day notice period prior to the end of a fixed term contract.

Ofgem has been issued with powers to levy fines against suppliers which do not comply, the regulator said.

Business concerns

“Two thirds of all the concerns businesses have about the market relate to billing, contracting and switching supplier, which is why our Standards of Conduct target these three areas,” said Andrew Wright, Ofgem’s chief executive. “The onus is now on suppliers to make sure they stick to these standards and get their customer service right.”

Two of the UK’s suppliers, British Gas and E.ON, have already limited their use of automatic roll-over contracts. The contracts will no longer be used in relation to E.ON’s SME customers, while British Gas has ditched automatic roll-overs for all of its business customers.

However, Ofgem indicated that it had no plans to introduce reforms for larger businesses.

“We found larger businesses have energy specialists who work for them, who carry out procurement for them,” a spokesman told Energy Demand. “So we have targeted these reforms at the smaller businesses which needed more protection.”

However, David Mason, senior sustainability manager at Skanska, warned that Ofgem needs to ensure that all businesses are able to get most competitive energy deal – whether they have an energy manager or not.

“These changes highlight the important role an energy manager plays in ensuring a company gets the best deal with its energy suppliers,” he told Energy Demand.  “However, it should be a fair playing field and the regulatory environment should reflect that.”

Moreover, he added, small businesses should not be duped into thinking that the new rules will exempt them from looking at their energy consumption.

“Although it is unlikely that a small business could afford an energy professional, these reforms only cover procurement,” he said.  “All businesses should be taking energy management seriously as there is a lot to be gained from energy efficiency and reducing unnecessary consumption.  For the small business there is a lot of free advice and support which can be accessed.”