Last year, the wholesale cost of business energy soared to record levels. In the autumn and winter of 2022, the fixed-rate energy tariffs offered on the market were incredibly expensive.
At the height of the energy crisis, the following fixed unit rates were the best available on the market:
- Fixed business electricity rate – 90p/kWh
- Fixed business gas rate – 40p/kWh
Thankfully, prices have fallen significantly since then, and there are now much better deals available with our business energy comparison service.
However, this is little comfort if your business is now stuck with a very expensive business energy contract. This article explores the options available if you’re trying to get out of a business energy contract.
Options for getting out of a business energy contract
Unfortunately, the reality is that the options for getting out of a business energy contract are limited.
When you agree to a fixed-rate contract, your business energy supplier will enter into forward contracts with energy generators agreeing to purchase the electricity or gas your company will use during the contract.
When you terminate a fixed-rate energy contract, your supplier is typically stuck continuing to purchase your electricity or gas. To protect them against this, a supplier typically charges an exit fee for early termination (more on that later).
The one big exception to this rule is the “change of tenancy” rule:
Explaining change of tenancy for business energy contracts
A business energy contract is associated with individual electricity and gas supply points (known as MPANs/MPRNs) at a specific address.
If your business moves out of your property during your business energy contract, then you can terminate your contract without any penalty.
To terminate your business energy contract when moving out, you’ll need to request a “change of tenancy” form from your supplier, giving them as much notice as possible.
For more information, here’s our guide to business energy when moving properties.
Termination fees in a business energy contract
If you choose to terminate your business energy tariff before the contract end date, you’ll incur an early termination fee.
Although the terms and conditions of each business energy supplier are different, a typical termination fee will include an unsupplied volume and a market rate fee:
Unsupplied volume fee – A supplier will typically charge 5 – 15% of your estimated business energy costs for the remainder of the contract. This includes both standing charges and unit rates per kWh for electricity and gas.
Market rate fee – A supplier will typically charge you for being stuck with the obligation to purchase your energy from the wholesale market. The more business energy rates have fallen (and therefore, the more onerous their purchase contract), the higher this charge will be.
Typically energy contract termination charges are sufficiently expensive that it won’t be worth incurring this to switch business energy suppliers to cheaper rates.
Securing lower business energy rates at the end of your contract
Unfortunately, it’s often the case that it’s necessary to wait for your current business energy contract to come to an end before you can secure lower rates.
In the business energy market, it’s possible to secure your new rates one year before your current contract ends. When you’ve got one year left on your contract, we recommend comparing rates offered by different suppliers using our comparison tools:
Compare business electricity suppliers
Compare business gas suppliers
Here’s our complete guide to coming to the end of a business energy contract.
