In August 2014 Ofgem appointed BMG to conduct research on ‘Micro and Small Business Engagement in Energy Markets’.
Its conclusions have now been published
Although the sample was relatively small at 1,502 and was not randomised but focussed on those who “were most likely to be affected by reforms resulting from Ofgem’s Retail Market Review”, the insight provided is still valuable in understanding the psyche, trust and understanding of businesses engaging in the energy market.
In this fifth review of the survey’s findings we focus on customer awareness
Contract awareness
- 48% of businesses report having read or at least glanced through their contract document in the last 12 months.
- 52% of businesses with 10-49 employees report having read or at least glanced through their contract document in the last 12 months.
- 52% of businesses who use a broker report having read or at least glanced through their contract document in the last 12 months.
- 51% of businesses who use telephone/website price comparison services report having read or at least glanced through their contract document in the last 12 months.
- 38% of businesses who have not switched supplier or used a broker report having read or at least glanced through their contract document in the last 12 months.
Business Juice comment: This stands testament to the increased transparency with which brokers operate in the market through highlighting through verbal contract scripts and provision of full T&Cs enabling the customer to better understand the contract they are entering into.
- 67% of businesses who have switched energy supplier in the preceding 12 months report having read or at least glanced through their contract document in the last 12 months.
- 33% of businesses who have switched energy supplier in the preceding 12 months report having not examined their new contract details.
- 60% of businesses who read or at least glanced through their contract were satisfied with length/size of the document
- 77% of businesses who read or at least glanced through their contract were satisfied with the clarity on the duration of the contract and renewal dates.
- 84% of businesses with a fixed term contract know at least approximately when it ends
- 59% of businesses with a fixed term contract know exactly when the contract ends
- 16% of businesses with a fixed term contract have no idea of when the contract ends
- 73% of businesses are aware of when they can start renegotiating their contract or give notice of termination to their supplier
- 27% of businesses with a fixed term contract do not know when they can start renegotiating their contract or give notice of termination to their supplier
Ofgem/BMG comment: Lack of knowledge of contract end dates and notice periods may be barriers to switching.
Critical date awareness
- 72% of businesses do not recall seeing a contract end date or a date they need to give notice by to renegotiate or terminate their contract detailed on their invoice
- 92% of businesses recall receiving a bill since April 2014
- 24% of businesses who recall receiving a bill recall seeing a contract end date on their bill,
- 20% of businesses recall seeing a date they need to give notice by.
- 16% of all businesses have both noticed details about contract end dates or dates from which they could renegotiate or give notice on their bills and have taken some action to explore their options in the last 12 months.
- 64% of businesses that had seen these details were prompted to take some action as a result of noticing the information.
- 68% of businesses having seen these details on an electricity contract were prompted to action
- 51% of businesses having seen these details on a gas contract were prompted to action
- 91% of businesses whose contract has been extended or rolled-over, claim it as being done their knowledge.
- 7% of businesses report the contract extension or rollover being without their knowledge (the remainder are unsure).
Business Juice comment: This is a truly shocking statistic. Given the premium for a roll over contract terms, fixed for 12 months is at least 30% higher than the market rate the wilful acceptance of such contract terms suggests a deep misunderstanding of the energy market by businesses. Clearly more needs to be done by Ofgem to highlight the simple steps that businesses can take to prevent them paying excessive costs for their energy.
Business Juice comment: Overall it is positive to see the level of engagement with, and understanding of, businesses energy contracts is increasing. It is especially pleasing to see that brokers and market interaction are key drivers in such new found levels of awareness and commercial savvy. What is clearly disappointing however is the seemingly all too resignation of businesses to being held to punitive roll over contract rates for want of market engagement. Ofgem, the energy suppliers and brokers must do more to demonstrate the very real value that is delivered by market interaction for UK businesses.