All business electricity and gas suppliers impose increases when renewing contracts ‘assumptively' which automatically take fixed rates from as low as five pence per kilowatt hour up to as much as 32p/kwh. Customers do not realise they must actively reject the new rate being offered to them mid-way-through their contract to avoid being tied-in for a further 12 to 24 months. Each supplier has different rules but the notice period ‘window' can be as narrow a week and is activated as soon as a renewal letter is sent which, in some cases, is as much as 120 days before the contract is due to end.



This practice is also noted by Datamonitor whose research (Retail Competition: The role of price in managing demand) found that an average loss of -5% margin is made on each new SME customer in their first year but that profit rises to an average of 32% on ‘default offers' thereafter.

Furthermore, suppliers deliberately disguise price increase notifications with letter headings such as ‘Offering your business more' or ‘We'll protect your new prices for two years'. This tactic is clearly working as the biggest business supplier has statesd in its annual report: “A 95% SME renewal rate”.

Business electricity contracts are not at all like household contracts which can be switched at any time. Our simple advice to avoid the assumptive renewal trap is to find out when your contract ends, ask exactly what notice you will need to give to reject their renewal terms and make a note in your diary to shop around when the time comes.

Chantrey Vellacott DFK, for example, is a long established provider of accounting, taxation and related advisory services with offices throughout London, the South East and the Midlands. Its roots go back to 1788, making it one of the oldest firms of chartered accountants in the UK. In 2005 the Croydon branch relocated to a Lansdowne Road office tower. As it approached the end of its initial electricity contract at the new premises, office manager - Derek Harris - checked the small print for any renewal clauses and kept an eye out for the supplier's letter with its proposed new rates for 2008. Sure enough, they were much higher than Chantrey Vellacott DFK was used to paying. In Derek's words: “Everybody knows that suppliers look at any way of increasing prices but what genuinely surprised us was that the saleswoman wasn't at all interested in keeping us as a customer on anything less than their pushy terms. They must work on the basis that there are enough people out there who don't realise they can just as easily switch onto new customer rates with a different supplier. It's a strange way of doing business but, sadly, that seems to be the way things are going with utility companies.” Derek used the renewal window to shop around and search for brokers who could offer cheaper prices on an impartial basis. Avoiding those who asked a seemingly endless stream of irrelevant questions, he ended up speaking to Make It Cheaper. It suggested a competitive one year contract and handled the transfer itself, with a promise to make sure that Chantrey Vellacott DFK is not rolled-over into unfair rates in future. Make It Cheaper also has a strict data protection policy so won't be passing Derek's details on to any third party salespeople.

In a similar example, Tudge Meats is a family-run farm on over 300 acres near Ludlow, Shropshire. It supplies naturally-fed free range chickens, seasonal turkeys and free range rare breed pigs, all of which are reared using traditional farming methods. It sells to caterers, restaurants and at farmers' markets including: Hereford, Ludlow, Leominster, Malvern and Abergavenny. Guy Tudge first used an independent broker at the start of 2007 when he received a renewal letter from his supplier with notification of a massive price rise which would have meant his annual bill more than doubling to £4,000. Guy suspected the letter was trying to catch him unaware as it unbelievably told him to 'relax'. He immediately served notice and asked Make It Cheaper to arrange a new contract. A different supplier was found, offering half the price. Guy sent his finest Berkshire sausages to Make It Cheaper's London HQ to say thank you!