A rollover business energy contract locks unwitting businesses into paying needlessly expensive electricity and gas rates. An Ofgem study found that rollover business energy contracts are typically 80% more expensive than the fixed business energy tariffs on commercial energy comparison websites.
This article offers a guide to understanding and avoiding rollover business energy contracts.
What is a rollover business energy contract?
A rollover business energy contract is an automatic agreement between you and your current business energy supplier that can kick in when you reach the end of your fixed tariff but haven’t made any arrangements to renew or switch your supply.
In an automatic rollover agreement:
- Your current energy tariff will extend for a new fixed period (typically one year).
- You’ll pay a fixed unit rate for electricity and gas for the rollover period.
Automatic rollover contracts are legally binding and cannot be terminated early (apart from moving premises). The unit rates you’ll pay in a rollover business energy contract are typically much more expensive than fixed-term contracts on offer in the market.
What happens when a business energy contract automatically rolls over?
A rollover energy contract can occur if your current fixed-term energy contract ends without you providing your supplier termination notice within the required notification period.
For more information on this, see our full article on what happens when a business energy contract comes to an end.
In summary, if you don’t do anything at the end of your contract, you’ll automatically transfer to either:
- A standard variable energy contract (that you can leave any time); or
- A rollover contract for a fixed period (that you can’t get out of).
The precise terms and conditions of your business energy contract will state which of these options will occur.
Automatic contract rollover terms
If rollover contract terms apply, the T&Cs in your business energy contract will include a clause that says something like:
The supply period will be extended for a successive [rollover period] period unless a termination notice is provided [termination period] days before your current supply period ends.
Rollover energy contract for micro-businesses
Ofgem recognises that rollover contracts can trap businesses into needlessly expensive rates. To help small businesses, Ofgem restricts the use of rollover contracts to just a single year.
Additionally, the termination notice period required for microbusinesses is just 30 days.
The microbusiness rules apply to any business or organisation which:
- Has fewer than 10 employees and the yearly turnover, or yearly balance sheet, is not more than €2 million; And/or:
- Uses less than 100,000 kWh of electricity a year (for an electricity contract)
- Uses less than 293,000 kWh of gas a year (for a gas contract)
What should you do if your business energy contract has rolled over?
Unfortunately, your options are limited. Rollover business energy contracts are binding; therefore, the same rules apply to all other fixed business energy contracts.
The only common scenario that allows the termination of a rollover business energy contract is where you’re moving out of the current property.
Here’s our full article on getting out of a business energy contract.
The best advice for businesses stuck on a rollover energy contract is to arrange for a better deal when the rollover contract does come to an end.
Here’s how to do it:
i. Issue a termination letter to your business energy supplier as soon as possible to avoid rolling over into a further rollover period.
ii. Use a business electricity comparison or business gas comparison site to find an alternative supplier who will offer cheaper rates for when your rollover contract ends.