LSI Energy give advice on commercial energy contracts

 

Barrie Jacobs, is Head of SME Sales at LSI Energy and has worked in the energy industry for over a decade and has vast experience in assisting businesses and charities of all sizes minimise their energy expenditure, saving them millions of pounds. 

As a voluntary organisation, do you know the difference between rolled, deemed, variable and contract energy prices?

It is important that voluntary organisations are aware of the terms and conditions of their energy contracts. Accidentally entering a rolling contract can leave your organisation considerably out of pocket. LSI Energy are available to assist NCVO members to ensure your business does not become a victim of suppliers’ terms and conditions in regards to expensive out of contract rates.

In this blog post, LSI Energy offers an explanation of each type energy contract along with the terminology used.

Rolled contracts

Rolled energy contracts are expensive and businesses should do their best to avoid them. A rolled contract is the term used to describe a business energy contract that automatically renews when a contract is ended. The contract an organisation is rolled onto is typically poor value for money and the business is likely to be stuck on this tariff for at least a year.

Deemed contracts

A deemed energy contract is usually put in place when a customer moves into new premises and begins to consume electricity, gas, or both, prior to agreeing a contract with a supplier. A deemed contract can also occur when an existing contract comes to an end, but the customer continues to use energy. This usually occurs when the original contract fails to expressively state what is to happen when the contract ends.

According to Ofgem, approximately 10% of micro-businesses are on deemed contracts, on average, 80% higher than rates on negotiated contracts. Also referred to as ‘out-of-contract’ rates, deemed contracts can considerably push up organisations energy bills. For many voluntary organisations struggling with cash flow and budgets, paying ‘above the odds’ for energy bills could be irreversibly crippling.

Variable Price Plans

Organisations should be aware that going on a variable rate plan will mean the tariff is linked to market activity, meaning unit prices can go up or down. Like a variable mortgage plan, unit rates may fall alongside market activity with a variable rate energy plan, meaning you pay less. However, if market activity causes unit rates to rise, you’ll end up paying more.

Generally speaking, variable rate plans work out more expensive than fixed-term rates.

When a fixed price plan comes to an end, failing to take any action, will mean that variable price plan rates could be applied to your business energy bills. As variable tariffs typically work out more expensive, it’s important that you review your plan will in advance of Fixed Plans expiring.

In summary what happens at the end of my contract if I don’t contact my supplier?

If you don’t agree a new fixed-term period or switch to another supplier, they will continue to supply you, usually at higher prices. You may still have to give notice and pay any outstanding debt before you can change supplier.

If you don’t want your contract to be automatically renewed for another fixed-term, you can send notice to your supplier from day one of the contract, but you must act to negotiate a renewal contract once it has ended or the automatic pricing mechanism will kick in.

Further information

NCVO Trusted Supplier LSI Energy are available as a benefit of your NCVO membership and their contract assessment and reminder service is free of charge for members. Email LSI Energy today or call 01727 877 020

 

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