Back to Basics: electricity supplies - how not to get ripped off

The list of things you have to do on your first day in a new pub is daunting. You are in a race to get everything done and be prepared for your first customer and it might appear as though the finishing tape isn't getting close enough.

You will probably feel nervous and unprepared, but with it a sense of excitement. There are also circling vultures ready to swoop on you. It happens continually and these vultures are often of the electricity supply variety.

The departure of a licensee from a pub sees the end of the electricity supply contract that is in place. But the supplier remains the pub's supplier until some action occurs. If it doesn't, out-of-contract rates normally apply and these can be 25 per cent to 35 per cent more than the last licensee was paying. So there is some urgency to do something.

You can expect the phone to ring on your first day with the caller hunting to take your electricity agreement from the existing supplier. These people are not put off easily. It is unlikely they are independent and happy to trawl the market for the best deal. They are likely to have one company in mind and it will be commission that drives them.

If we stop to think about it, how do these people know you are the new licensee and it is your first day there? The fact is that they make it their business. You should be prepared for trickery and deception to wrest your supply from the company currently providing electricity. The simple advice is:

- Never agree to change electricity supplier by telephone​

- Never give out your bank details over the phone to set up a direct debit.​

You will not get cut off. It will not be the regulator calling you, as some will assure you it is. It is certainly not something that needs to be attended to in your first week, let alone on your first day.

I have been involved in audits and investigations in some big organisations, and when it comes to sharp practice and deception, much of what I have seen is the individual helping himself to the funds of a big company.

With the licensed trade, however, what strikes me most is that it is the other way round. It is the individual who pays the price. The honest, hard-working licensee is the one who has his or her livelihood threatened by the vultures who care for nobody other than themselves.

There are so many newcomers entering the licensed trade in good faith who are not prepared for some of the tests to which they will be subjected. Electricity is something that normally comes on with the flick of a switch. Now you are expected to know the markets and be able to choose the company, tariff and length of the contract best for you.

You can try, and you might get near to the good deal. But you really need advice from those with experience of the market. A cold-caller representing a single company is not the one to help you objectively.

Some responsibility rests with the pub company or brewer offering the licensee the tenancy or lease. I am sure many do give some advice. We have arrangements in place ourselves with certain companies. However, many don't cover this important topic and are unaware of the seriousness of the problem for licensees.

If you are a new licensee, I hope you will sidestep the vulture's beak by remembering some of the highlighted points in the guidelines here. Good luck in your new venture.

How to avoid getting ripped off

When taking control of new premises…

- Immediately take readings from all meters.

- Note the serial number of each meter.

- If the meter is digital (as most are these days) press the button and go through the sequence. Many pubs have multi-rate tariffs and you will need a reading for each of the time zones (typically day-evening and weekend-night).

- Do not agree to a contract price on the phone - these calls are recorded and they are likely to legally bind you into a contract.

- Never give out bank details over the phone. They can be misused. If you are entering into a direct debit make sure it is on an authorised form in writing.

- Inform your staff of these rules; they could unwittingly bind you into a contract.

- Be careful what you sign on the day or the week of moving in. Another method of tying you into a contract is the suggestion that you are signing to OK a meter reading. Proper meter readings do not need you to sign!

What happens when you move in?

- Whichever company is the outgoing licensee's electricity supplier retains the supply at the pub until you opt to change that supplier. They may immediately charge you out-of-contract prices, which are generally 25 per cent to 35 per cent higher than market prices.To get a better price you need to enter into a new contract with the existing supplier or a supplier of your choice.

- Beware of the small print; some contracts have fixed prices for the duration of the contract, others have the facility to increase prices throughout the term.

- The switch should take 10 to 28 days, if there is no objection from the supplier. (Suppliers regularly put in objections for no apparent reason, or because there was a problem with the previous tenant.) You need to check that the contract has been accepted, because if there is a failure or rejection you need to ask your preferred supplier to re-apply.

Budgeting

- Having taken the meter readings on the day of takeover you need to follow up within two weeks and work out the daily consumption for your site. This information and the contract rates you have will enable you to budget for your power costs.

- You will need to add 43p per unit for the climate change levy; another government tax.

- Also take into account standing charges and availability/maximum demand charges if they apply to the account.

Checking the bills

- Be sure the opening meter readings tie up with the bills you receive. There are many errors in this early in the process.

- If the previous supplier doesn't have an accurate reading it applies a 'deemed' read, an estimate that is agreed with all suppliers. This can work against you.

- All bills need to be checked for accuracy, in terms of both meter readings and contract prices.

- It is good practice to take meter readings regularly, perhaps on the first day of each month, and keep a record. This can be used when reviewing your budget figure and for monitoring estimated readings.

- Note the termination date of the contract. Failure to give notice in time means you will default into out-of-contract terms or be committed to an extended contract period. Notice varies between 30 and 90 days.