If you think you’re paying too much for your business energy, are unhappy with the service your energy company is providing or you are simply coming to the end of your current fixed-term contract and you want to avoid an expensive automatic renewal, it’s time to search for a new business energy deal.
However, unlike the domestic energy market, getting out of a utility contract and switching to a new provider isn’t always straightforward when it comes to business rates. That’s why it’s important that as a business owner or an energy procurement officer you understand how the switching and renewals process works.
From knowing how to formally end an energy contract and how much notice you will have to give to ensuring you can leave without a penalty or exit fee, this energy contract switching and renewals guide will tell you everything you need to know.
How do you end an energy contract?
Unlike typical domestic energy deals, commercial gas and electricity contracts are set for a fixed length of time that are usually set to renew automatically when the contract is coming to an end. For all intents and purposes, your business is tied into a contract until it expires or you formally make your provider aware you are not renewing your contract during your agreed notice period. This makes the process of getting out of or cancelling an energy contract and switching to a new provider tricky if you don’t know when you can switch tariffs without incurring a penalty fee.
With this in mind, if you want to end your current business energy contract, you must wait until the deal is coming towards the end of its initial fixed term and then contact your provider to inform them of your intent to leave when it expires. This must be done within your agreed notice period – a window of time that will be specified on your contract. It’s important to remember that, for the majority of businesses, it is not the responsibility of your supplier to remind you that your contract is coming towards its end date and is set to automatic renew – it is your responsibility to know when this is due to happen. Only ‘microbusinesses’ are legally required to be sent a reminder by their providers, so make sure you keep an eye out for deadlines and properly manage the terms and conditions of your business energy contracts to avoid a nasty shock.
A microbusiness is a business that:
- employs fewer than 10 employees and has an annual turnover no greater than £1.8 million (or)
- Uses less than 293,000 kWh of gas per year (or)
- Uses less than 100,000 kWh of electricity per year.
When can I leave my energy supplier without penalty?
Once you have decided to leave your current provider before an automatic contract renewal, the first step you should take is to let your energy provider know that you are intending to terminate your contract. As discussed above, to avoid a penalty free, you can only do this during the notice window outlined in your agreement. You will then stay with your current provider until the end of your notice period, at which time a pre-arranged contract with a new provider can begin.
How much notice do I have to give my energy supplier?
The length of notice you are required to give when terminating your energy contract will all come down to the terms and conditions of your contract. The length of these periods tend to vary between providers. Some will require just 28 days notice, while others could demand at least 60 days or two calendar months. Although it is rare, some providers will even insist on as many as 90 days notice before your contract ends. This is why knowing the ins and outs of your contract is vitally important. Contacting your provider to give notice is simple and plenty of termination letter templates can be found online to help you.
It’s also essential to note that once you’ve given your provider notice, finding a new energy supplier should be a high priority. If no new agreement is in place at the time when your current deal expires, you will be placed on ‘out of contract’ rates – these can be as much as double your usual rates.
What are energy exit fees?
As discussed above, if you try to leave your business energy contract early, don’t give your notice in your agreed upon window and do not follow the correct termination process, you could be handed financial penalties at the discretion of your provider. These penalties are known as ‘exit fees’.
Unlike domestic energy, which is usually bought and charged for on a monthly basis, business energy is bought by your supplier in bulk at the start of your contract. This means that, although you should benefit from cheaper fixed rates, it also makes it difficult to end your tariff early as this could result in your provider losing money. Energy exit fees in the UK are a way for providers to claw back some of this money in the event of an early termination and act as a deterrent. These fees are typically charged per service, which means that if you’re on a dual business energy deal that covers both your gas and electricity, you will be charged a fee for both, and the amount will usually depend on how long is left to run on your deal and how much energy your business usually consumes.
Finding a new energy provider
Whether you have decided to leave your current energy supplier through the correct termination procedure or have agreed to pay exit fees to withdraw from your tariff early, your next step is to start searching the market for the best new deal. Remember – you must have a new deal in place at the time your old deal expires to avoid expensive ‘out of contract’ rates.
Perhaps the quickest and easiest way to do this is to use a specialist price comparison website, like Utility Bidder, to help you scour the market for the best energy deals to suit your business. Comparing the best business gas and electricity rates available and using strong relationships with more than 27 of the UK’s biggest business energy suppliers, Utility Bidder makes the energy contract switching and renewal process easy. We manage the whole switch on your behalf, leaving you to concentrate on the important matter of running your business.
Immediate pricing access to all major UK gas suppliers. We can save you upto 45% on your business gas prices.
We manage 20,000 electric meters for our commercial customers – So you’re in safe hands.
We’ll find the best prices and provide you with a hassle free service for both your business gas and electricity….
With our help. You’ll get a better quality service, lower water bills and better value for money.
Frequently asked questions
A win back is when your current energy supplier offers you a cheaper contract than the supplier you have agreed to move away with.
Very common – we estimate that between 10% and 20% of all contracts brokered by TPI’s / Introducers are win backs
You may be by failing to take up the contract you have entered into with the new supplier. Most suppliers have termination clauses in their agreements. However we have never seen any supplier enforce the clauses – as win backs work both ways. As a result suppliers seem to accept that they are part of the normal function of the switching market – sometimes they win and other times they lose. Suppliers offer win backs both directly to customers and via third parties / brokers.
Ofgem were not aware of win backs until Utility Bidder highlighted their practice within our recent Ofgem micro business review submissions. We have asked that Ofgem provide clarity on win backs going forwards after consulting with suppliers.