British Gas first to end auto-rollover SME contracts - it won't be the last

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31 July 2013, Gas, Electricity

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In parliament and various select committees, it is believed that all small businesses are clueless when it comes to their energy supply, and that all energy suppliers are looking to take advantage. Regardless of the accuracy of such a notion, British Gas has taken a big stride to dispel it. From September 2013, British Gas will no longer follow the industry-wide practice of automatically rolling SME customers onto new (usually higher rate) contracts once the renewal period has expired. But what effect will this have on small businesses and on the wider market?

Missing the renewal period for a contract is easy to do for small businesses, with generally no dedicated member of staff to deal solely with energy, and British Gas' move away from rollovers is rightly being hailed as positive for SME customers. Now when the renewal period expires, if British Gas has not been contacted by the customer about a renewal (or switch), it will be proactive and will present the customer with a new variable or fixed option and help them to make an informed choice.

However, has British Gas really done this simply to protect its customers and act as the industry's moral compass? That's one way of looking at it; another view would be that this is an effort to appease the government and Ofgem, both of which are becoming increasingly vocal about what energy suppliers should and shouldn't do. There is also an element of strategic positioning, in response to E.ON's decision to put contract end dates on customer bills so that they are aware when it is time to think about renewal or switching to a new supplier. In this respect, British Gas has gone one step further and acted in an even more transparent and honest way than its rival.

If other suppliers follow suit - which they are almost certain to do - it could have a significant effect on the industry. Customer satisfaction will likely increase, as consumers will feel less exposed to suppliers' perceived untrustworthy antics. Meanwhile, brokers will also be affected. Companies such as Make It Cheaper help prevent customers from getting trapped in expensive rollover contracts, and advertise this service as a key selling point. If this USP disappears via widespread adoption of British Gas' tactics, then brokers may find it much harder to convince customers not to go direct to energy suppliers. / / @DatamonitorEN

Source: MarketLine

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