Domestic energy suppliers are required as a condition of their licence (Standard Condition 23 of the supply licence – SLC23) to notify their customers of a unilateral variation of their contract to increase prices or in any other way that is to the significant disadvantage of the customer (these changes are known as ‘relevant variations’). Ofgem has issued guidance on price increase notices and termination fees to clarify that any increase in price which is made by the supplier or at the suppliers discretion amounts to a unilateral variation and therefore the rules about notifying customers, customers avoiding the variation and termination fees (see below) apply to any increase in price for contracts whereby the price is guaranteed to be below the price charged by a supplier for their standard contracts (including a price increase within that guaranteed range).
Changes to SLC23
At the time of the Energy Supply Probe we committed to examining SLC23. Following a review and consultation, Ofgem changed SLC23 on 28 April 2011 so that energy suppliers are now required to notify customers at least 30 days in advance of ‘relevant variations’ taking effect. This means that domestic customers will receive advance notice of ‘relevant variations’ and will normally be able to switch without being affected by those variations (and without being charged a termination fee).
Avoiding the variation
Once a customer becomes aware about a ‘relevant variation’ (e.g. a public announcement or individual notification), they can notify their supplier that they intend to switch in order avoid the effects of those variations at anytime on or before the date the variation is scheduled to becomes effective. Once the customer notifies their existing supplier of their intention to switch, their existing supplier must receive notice (within 15 working days) that the new (gaining) supplier will begin supplying the customer within a reasonable period of time. The new (gaining) supplier is responsible for triggering this notice.
Avoiding termination fees (Exit fees)
Domestic suppliers are only permitted to charge a termination fee during a fixed term period of a fixed term contract. However, domestic suppliers may be prohibited from charging a termination fee during a fixed term period if they decide to make relevant variations. For the prohibition to apply and therefore for the customer to avoid the termination fee the customer must have notified their current supplier (orally or in writing) on or before the date of the relevant variation taking effect of their intention to switch supplier. The customer does not have to actually switch supplier or switch within a particular timeframe to avoid the termination fees. These rules are provided for in SLC 23 and Standard Condition 24 of the supply licence and some particular aspects are explained in our guidance on price increase notices and termination fees.
Customers in debt
Customers in debt* (that is, where charges which have been demanded by the supplier in writing (e.g. by a bill) and which remain outstanding for at least 28 days) can also switch in order avoid the effects of the variations by following the same process above. However, they need to pay the outstanding debt before the switch can go through. Once the existing supplier receives the notice from the new supplier they can block the customer from switching on grounds of debt and issue a notice to the customer to this effect (‘blocking notice’). From the date of receipt of the blocking notice the customer has 30 working days to repay the debt.
Further information
This section contains documents in relation to our work on modifying SLC 23 – the period for notifying unilateral contract variations and related matters. For information on making complaints please visit our consumer page.