In the commercial energy market, deemed rates (what you’ll pay if you have not agreed on a contract with your supplier) are as high as twice the price of a negotiated contract. This makes the cost of not arranging a business energy contract at the right time incredibly high.
If you forget to do anything at the end of your business energy contract, you’ll automatically start paying needlessly expensive business energy rates.
In this guide, we’ll explain the basic steps you can take to avoid the pitfalls of paying needlessly expensive out of contract energy rates.
What happens at the end of a business energy contract?
Typically companies pay for electricity and gas through a fixed-rate business energy tariff. The key terms of a business energy contract are:
- An agreed upon daily standing charge and unit price per kWh
- An agreed term typically of 1 to 3 years
Business energy contracts are simple, but taking the right steps at the end of these contracts is crucial to avoiding needlessly expensive energy rates.
In this article, we’ll explain the key things you need to know when you are in the last year of a business energy contract.
Timeline of the end of a business energy contract
Let’s start with a basic timeline of the end business energy contract:
Getting the timing right at the end of your business energy contract is critical. We recommend getting the following dates important dates in your calendar:
One year before the contract end date – This is when you’ll be able to get quotes from alternative suppliers and arrange a new contract either with your current or an alternative business energy supplier.
Termination window close date – All business energy suppliers require you to give a certain amount of notice before the end of the contract if you want to switch suppliers. The notice you need to give depends on your precise contract but is typically between 30 and 120 days. This date is a deadline for avoiding an unfavourable rollover or deemed contract.
Contract end date – This is when your business energy supplier will cease to provide electricity or gas at the agreed unit per kWh unit rate and daily standing charge.
If you don’t know your contract end date and the termination notice deadline, we recommend contacting the customer services department of your business energy supplier.
Your options at the end of a business energy contract
Three different outcomes can happen when a business energy contract comes to an end. In this section, we’ll explore the pros and cons of each of these outcomes:
Do nothing and continue to be supplied under a deemed business energy contract
This is the easiest option from an admin perspective but is the one where you’ll end up paying needlessly expensive rates for your electricity.
Within your current business energy contract will be a clause that explains what happens if you reach your termination close window and you’ve not made arrangements for your supply.
Typically one of two things will happen at the contract end date:
- Rollover contract – You’ll automatically be contracted for a further fixed term of one year at a standing charge and rate per kWh determined by your current business energy supplier. You’ll not be able to switch to a more favourable agreement until the end date of the rollover contract.
- Standard variable contract – You’ll continue to pay your business electricity supplier at a variable rate determined by the current wholesale energy market. The business energy rates you pay will go up and down with the market. You can switch away from the standard variable contract at any time.
Accept the renewal terms offered by your business energy supplier
Your current business energy supplier will send out an offer of renewal rates when your current contract is coming to an end.
The timing of the renewal offer depends on your supplier. Some suppliers do this when you have one year remaining on your contract, and others do this after the termination window closes (when you have little option but to accept).
The renewal offer will typically come in the form of a fixed-rate business energy tariff:
- A term between 1 and 3 years.
- A fixed daily standing charge.
- A fixed unit price of electricity or gas per kWh.
If you choose to accept the renewal terms offered by your supplier, your new contract will automatically commence on the contract end date of your current contract.
Switch to a contract being offered by an alternative supplier
The market for business electricity and gas supplies is highly competitive, with lots of suppliers competing to offer the best prices.
To encourage competition within the business energy market, Ofgem (the regulator) ensures switching between suppliers is a simple process.
In the last year of your current contract, but before your termination window closes, you can arrange to switch suppliers from your contract end date. Here’s how to do it:
i. Collect quotes from across the market with a comparison service
To get the best prices, it’s important to compare as many business energy suppliers as possible. Using a business energy comparison service makes this process as easy as possible.
With a few details about your property and your contract, a comparison service will provide you with fixed-rate quotes. Typically business energy renewal quotes are not particularly competitive, so you can save significantly by switching suppliers.
You’ll be able to compare these quotes against the renewal offer to see if you can save money by switching suppliers.
At AquaSwitch, we offer business energy comparison services; start today:
Compare business gas rates
Compare business electricity rates
ii. Make a hassle-free business energy switch
If you decide to take advantage of one of our quotes, we’ll take care of a hassle-free switch to a new business energy supplier.
We’ll help you through each stage of the process:
- Signing a fixed-rate contract with your new supplier
- Providing a termination notice to your current supplier
Here’s our full guide to the process of switching business energy suppliers.
How do I terminate a business energy contract?
To terminate a business energy contract at the contract end date, you’ll need to send a termination notice to the supplier.
Your business energy contract will tell you where to send your termination notice.
Here’s a business energy termination template which you can use.
If you choose to use a business energy broker to help with your switch, they’ll likely serve the business energy termination notice on your behalf.
What happens if you don’t renew your business energy contract?
If you don’t renew your business electricity or gas contract, then you’ll continue to be supplied by your current supplier with either:
- A standard variable contract
- A fixed-term rollover contract
Either way, you’ll likely be paying unnecessarily expensive business energy rates.
What should I do about renewing my business energy contract?
To avoid unnecessarily expensive deemed energy rates, you should make arrangements for renewing or switching your business energy contract between:
- One year from your contract end date
- The termination window closing on your contract
During this time, we recommend using a business energy comparison service and comparing the renewal quote from your business energy supplier to rates being offered by other suppliers.
How much notice do I need to give my business energy supplier for termination?
It depends on the specific wording of your contract, but it is typically between 30 and 120 days.
Ofgem, the regulator, now requires that micro businesses have a maximum termination notice period of 30 days.
Can I end my business energy contract before the contract end date?
If your business ceases to own or occupy your property, then your energy contract can be terminated without penalty.
This is known as a ‘change in tenancy’. You’ll need to provide your business energy supplier with the following:
- The end date of the contract will be the date you cease to own or occupy the property.
- Your future address and other contact details.
- The name and contact details of the new occupier of the business property.
Your business energy contract will say where the change in tenancy notice needs to be sent.
You’ll need to give your supplier a final meter reading on the end date. We recommend taking a photo for your records.
If you’re not leaving your property, then you’ll likely need to pay an exit fee if you choose to break your business energy contract early.