Cooling-Off Period for Business Energy Contracts – FAQ

Navigating the world of business energy contracts can be a daunting task. Understanding all your options and making informed decisions can save you from potentially costly mistakes.

In this blog post, we will help you tackle the challenges of a lack of a cooling-off period in business energy contracts, the possibility of adding one, options to terminate your current contract and how to do so when it’s up for renewal.

Short Summary

• Business energy contracts lack a cooling-off period, making it important to consider needs and options before signing.
• Negotiating a cooling-off period is possible, but not all suppliers may be willing to provide the option.
• There are ways to terminate your current contract within the renewal window.

Is There A Cooling-off Period in Business Energy Contracts?

Unlike domestic energy contracts that come with a mandatory 14-day cooling-off period, business energy contracts do not have a cooling-off period. This can have significant implications on your current contract, affecting your energy costs and contract flexibility. Without a cooling-off period, you can find yourself locked in an unsuitable agreement until its end date and unable to switch to a more favourable deal.

The absence of a cooling-off period means that businesses must exercise due diligence and assess their decisions thoroughly before signing a business electricity contract. This makes it even more critical to choose the right business energy contract for your business.

Is it possible to add a Cooling-off Period in Your Business Energy Contract?

There might be a glimmer of hope. By negotiating with your business energy supplier, you may be able to include a cooling-off period in your contract.

Make sure to thoroughly read the terms and conditions of the contract before signing, so that you are aware of any potential cancellation policies and fees. Be specific about your expectations and the reasons behind your request for a cooling-off period. By presenting a strong case, you may be able to persuade your supplier to accommodate your needs.

However, it’s important to keep in mind that not all suppliers will be willing to offer a cooling-off period. This makes it crucial to communicate your needs effectively and be prepared to walk away if a suitable arrangement cannot be reached.

How can you Cancel Your Business Energy Contract?

Simply put, without a cooling-off period you cannot cancel your business energy contract before the contract end date. Maybe you were successful with your negotiations to add one before agreeing on a new contract, but often businesses won’t have a cancellation option.

What are your options if you cannot cancel your business energy contract?

In reality, your options are limited if you want to end your business contract before it’s end date. Without formally being able to cancel your contract there are only a handful of circumstances to terminate your current energy contract.

Change of Tenancy rule

Depending on the terms and conditions of the existing contract, a change of tenancy may give you the opportunity to terminate your contract. If you are willing to move your businesses site then your energy supplier may let you settle any outstanding bills and/or an early exit fee. You should give notice to the supplier within a specified time frame mentioned in the contract that may cover changes to tenancy. Once settled you would be able to search for a new business energy contract.

Instead of terminating the contract, but also a method for you to exit the contract, is transferring the contract to a new tenant, but only if the energy supplier permits the transfer. The new tenant will assume responsibility for the energy supply and associated costs from the transfer date onward.

Declaring bankruptcy

This isn’t an ideal situation as your business would be in a troublesome place, however, it can take declaring bankruptcy to terminate a contract. Unfortunately, it isn’t always the case that the energy contract would end and in some cases, the contract may continue despite the businesses’s bankruptcy. Termination of the contract is likely especially if the business isn’t able to meet the remaining financial obligations, another outcome is the contract gets assigned or transferred to another party that may be the new tenant of a property or the landlord of the rental lease. Overall bankruptcy laws are complicated and the outcome is not as straightforward as you would expect but it is one way for an energy contract to be terminated.

Blend and extend

Cancelling an expensive contract doesn’t always mean switching suppliers. Instead of searching for a better deal on the energy market you may be able to negotiate with your current supplier to extend your existing contract but blend it with a new energy tariff. Blend and extend contracts can be quite complex and we’d highly recommend seeking the support of an energy broker to help you with this process. This gives you the option to save money when energy prices have dropped and avoids the hassle of switching suppliers. However, if you have only just entered a contract then your current supplier may be reluctant to offer a better deal, but it can help them as it secures your business for a longer period of time.

Switch during the renewal window

You can only switch to a new supplier once the contract end date has hit, therefore it is vital to know this end date and know when the renewal window starts. Within this window you are in the notice period where you can contact your supplier to let them know your intentions. This renewal window is often one to six months before the contract end date. You still have to complete the existing contract with your supplier, it just gives you plenty of time to find a new supplier, or agreeing a new contract, before your current energy contract ends.

For more information on business energy contract renewals view our renewals guide.

Terminate contract

On the extremely rare occasion that a supplier includes a cancellation clause, you may be able to terminate the contract before the end date but expect high early exit fees as the suppliers would look to cover their costs of bulk buying the energy from the generator.

Why do business energy suppliers not include cooling-off periods?

Once a contract is agreed with the supplier, the supplier uses this contract to enter a contract of their own with an energy generator. Energy suppliers buy the energy upfront depending on the amount you are estimated to consume during the contract length.

If a fixed term contract was able to be terminated then energy suppliers would be stuck with the energy they’ve agreed from the energy generator and be at a loss. Not being able to cancel a contract is their form of protection.

How do I terminate my business energy contract during the renewal window?

So you’ve decided the best option is to give notice to your current supplier that you are going to secure a new business energy contract or switch suppliers. You usually will have one to six months before the contract end date to notify them of your choice. Small businesses should have at least three months’ notice.

It is critical you give notice formally during this period as failing to do so before the contract end date will result in your being automatically rolled into a deemed energy contract with your existing supplier at an uncompetitive rate.

So what are the next steps?

1) Look for your renewal letter

Business energy suppliers are legally required to issue a renewal letter to all micro businesses at least three months before the contract end date. A micro business is considered to be a business that meets any of the following criteria:

• Fewer than 10 employees
• yearly turnover or balance sheet that is £2 million or less
• annual electricity consumption is less than 100,000 kWh
• annual gas consumption is less than 293,000 kHw

The renewal letter provides you with information on your current tariff and estimated annual usage, it will provide you with terms of the contract termination but also renewal options if you decide to take out a new contract with the same supplier. These figures are good to record to help you compare energy deals when selecting a new energy contract.

If you are not considered a micro business then it is your responsibility to know your renewal date and terminate your contract in term.

2) Find your contract end date

Ofgem has enforced all energy suppliers to write the contract end date and the notice period on all fixed term contract bills for micro businesses. If you did not receive your renewal letter and need to find your dates, suppliers usually do this on larger businesses as well. If in doubt just contact your supplier and ask for the end date.

3) Notifying your supplier with a termination letter

You must notify your supplier of your intentions. To do so, you’ll need to send a termination letter, which should include the following details:

• The energy provider’s address
• Your company’s registered address
• The contract number
• Your meter numbers

You have to send the termination before the final 30 days of the renewal window so that the supplier has at least 30 days’ notice when cancelling your contract. Failure to do so could result in you being rolled over into a deemed contract.

Make sure to keep a copy of the termination letter for your records, in case any disputes arise.

4) Select your new supplier

Now that you have officially given notice to terminate your contract you can start to compare energy deals. Keep the information from the renewal letter as you will have the estimated annual energy consumption that can help you get easily comparable rates to help you find the most competitive deal. We highly recommend using the services of an energy broker as their services would generate accurate energy usage data and potential future consumption forecasts to help you save money in the long term as they find you the best business energy tariff.

Summary

In conclusion, coming to terms with the absence of a cooling-off period should be an alarm bell to ensure we select the right business energy contract. By exploring the possibility of adding a cooling-off period, managing your contract when it’s up for renewal, and knowing the steps to cancel your contract during the renewal window, you can ensure that your business is not locked into an unsuitable agreement and that you can transition to a new supplier without complications or financial consequences.

Remember to be proactive in your approach, stay informed about your energy usage, and continually evaluate your supplier’s performance. By doing so, you can make the best possible decisions for your business energy needs and secure a suitable energy supply for the long term