Utilita first energy company to introduce 12 month tie-ins

Utilita has become the first energy supplier to tie customers into long-term contracts following Ofgem’s removal of the 28-day switching rule.

Karen Darby, founder of SimplySwitch.com, the price comparison and switching service, comments: “Power firms have long argued that it’s too costly to install energy-efficient equipment in homes because customers were free to switch providers once the work had been carried out. It was for this reason that Ofgem changed the rules to allow energy firms to tie customers in for a longer period.

“However, following the change, Utilita, a small independent energy provider, has become the first supplier to bring in 12-month contracts as standard without introducing additional benefits.

“Switching suppliers has led to the competitive market that we enjoy today and any move that forces customers into long-term contracts will not be well-received. Utilita is the first company to take advantage of Ofgem’s new rules for commercial gain. If the larger suppliers follow Utilita’s lead, competition in the energy market will suffer and Ofgem may need to re-evaluate its plans.

“If mainstream suppliers do introduce longer-term tariffs, it will be the first time that any have taken this step. To date this has only applied to certain capped price deals and smaller, new-entrant providers that have introduced a 12 month contract with benefits that were justified to the regulator in advance.

“Time will tell how the UK’s main suppliers react to the new contract-length rules. We recommend that consumers check that they’re on the best deal now as there are currently no barriers to switching. If suppliers do to introduce longer term contracts, we hope that consumers won’t have to pay punitive ‘exit charges’ when they want to switch.”