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Contract Termination

Chris Hurcombe July 30, 2012

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Contract Termination

the process of contract termination is extremely important, as all energy contracts with suppliers automatically renew themselves after the initial contract term, unless you terminate your agreement with them, or if you have specific conditions in you’re contract that doesn’t require you to provide termination, such as new rules regarding micro business in the UK.  1x1.trans Contract Termination

This can mean that your energy contract will be “rolled over” into a new annual contract at an uncompetitive price as the supplier knows you can not move away from them for a minimum of 12-months and in some cases even up to 2-years.

Unfortunately in many cases customers miss their renewal date, and don’t provide a supplier with a contract termination in time, or accept price increases through inertia because they’re to busy trying to run their own business.

Unbelievably it is not the responsibility of the energy supplier to remind you that your energy contract is coming to an end and that you need to do a contract termination with them to avoid an automatic renewal.

If a supplier does write to you it is normally to provide you with your renewal prices only, and normally after the minimum notice period has already lapsed, so you are stuck with what ever they offer you.

Let’s get one thing clear, the supplier does not want to draw your attention to the fact that they want to charge you higher prices for your new contract and they wont attempt to remind you of your contract termination.

These letters are often disguised and headed as follows:

  • British Gas – “We’ll protect your new prices for two years”
  • Npower – “Secure your prices for 12 months and avoid future increases”
  • Scottish & Southern – “Electricity renewal offer”
  • EDF Energy – “Offering your business more”

Most businesses do not recognise the importance of these letters from their suppliers. The letters do not say what percentage the increase is, or how much more it will cost you.  If your supplier sends you a renewal offer, look at it immediately, it may only be valid for a short period of time.  Our advice is to reject the offer by sending a termination letter to your supplier. This will ensure that you are not locked in on the renewal prices and free to shop around for a better deal. 1x1.trans Contract Termination

If you do not reject the renewal offer from your current supplier within the required termination window the supplier will deem it as an implicit and unconditional acceptance for another contract term. In short, if you do nothing you are accepting their new contract.  You will not be able to shop around for a better deal instead, stuck on higher prices weather you like it or not.

To prevent your current supplier from automatically renewing your contract you are required to give them a contract termination or notice of your intention to cancel your current contract when it finishes. This will need to be done in accordance with their supplied contract terms & conditions.

A contract termination letter is the best way for you to give this cancellation notice. We strongly advise that you refer to your original contract terms & conditions or contact your supplier to establish where this letter should be sent.  This will also confirm the minimum period of notice that the supplier requires normally between 30 and 120-days is standard.  It is always advisable to send this contract termination letter recorded delivery, as suppliers will often claim that they haven’t received your contract termination letter.

If you do not send a contract termination letter your current supplier will renew your contract on higher prices and prevent you from switching to another supplier offering a better deal.

If you send in your contract termination letter your current supplier will continue to supply your energy up until the day your current contract ends.  If you decide to switch to a better deal your new supplier will supply you from your contract renewal date onwards.

1x1.trans Contract Termination

Notice Of Contract Termination

It is not the responsibility of the energy supplier to remind you that your energy contract is coming to an end and that you need to terminate with them to avoid an automatic renewal

  • Suppliers renewal letters are often disguised
  • Our advice is to reject the offer by sending a termination letter to your supplier
  • A termination letter is the best way for you to give this cancellation notice. We strongly advise that you refer to your original contract terms & conditions or contact your supplier to establish where this letter should be sent
  • It is always advisable to send this letter recorded delivery, as suppliers will often claim that they haven’t received your termination letter
  • Is your energy contract coming to an end?  Give us a call before you renew any contract and let us find the best quote for you.
  • Use our end of contract letter template for your own use, as we are happy for you to use our notice of termination of contract letter template.
  • A sample termination letter can be found below.

1x1.trans Contract Termination

The Contract Termination Small Print

Business electricity and gas suppliers are offering moderate and medium sized business consumers a bad deal by hiding behind the contract small imprint. Price is the driving factor when negotiating a new business electricity or gas deal but don’t fall into the commodity trap as suppliers will catch you out.  Business Electricity and Business Gas suppliers in the UK are hiding behind the supply agree small print to the detriment of their customers. 1x1.trans Contract Termination

Supply contracts for small and middle sized business electricity and gas customers are heavily weighted in favor of the supplier as many of the contract terms mystical in the small print, are very ambiguous and will undoubtedly win the consumer out if they are not explained before they agree to the contract.  Hidden in the small print is information about the cancellation clauses, price variability conditions, advanced termination timescales and how long the contract lasts for.  These clauses are crucially important when a customer takes out a contract or switches electricity or gas provider.  Always keep the terms and conditions that you agreed to, as these can change.

One of the most important questions the customer needs to ask before they agree to the business energy contract is how long the price is fixed for and what type of contract is being offered? Most business electricity and gas supply contracts for small and medium sized business customers in the UK are “evergreen”, which means that the contract will continue unless the customer serves notice within a specified number of days before the fixed term renewal date.

Although the contract price is the “carrot” when negotiating a new energy agreement please ask the company the following questions before agreeing to sign up:

  • How long is my business electricity or gas price fixed for?
  • What type of contract am I being offered, is it an evergreen contract that will assume renewal if I do not serve notice?
  • How many days termination notice do I have to give you before my fixed price expiry date?
  • What method do you use to offer me renewal prices prior to the end of my fixed price expiry date – post, email or telephone?
  • If required, can I cancel the contract mid term and how much will it cost?

Ofgems Micro-Businesses Reform

Small businesses vary significantly in their size and in their energy buying expertise.  An investigation and probe from Ofgem identified that the smallest businesses struggle to engage in the energy market.  So, Ofgem introduced new rules to give them better protection. The majority of small businesses in Britain are micro-businesses and Ofgem’s reforms only apply directly to these companies.

Under the new rules an energy micro-business is defined as a company which*:

  • Consumes less than 200,000 kWh of gas a year, or
  • Consumes less than 55,000 kWh of electricity a year, or
  • Has fewer than ten employees (or their full-time equivalent) and an annual turnover or annual balance sheet total not exceeding €2m.

A business only has to meet one of these criteria to qualify as a micro-business customer.  The new rules took effect from 18th January 2010 and will apply to all new contracts entered into on or after that date. The conditions will not apply retrospectively, meaning that for customers on existing contracts, the new rules will only begin to apply when the contract is extended on, or after that date.  Please contact us if you would like us to provide notice of termination of contract for your current energy contract.  We can ensure that your Contract Termination has been processed and provide a range of quotes for comparison purposes.

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About Author

Chris Hurcombe

Chris co-founded Catalyst Commercial Services in 2001, and has had a very successful 15-year career in the utilities industry at Director level. Chris is an authority on how businesses need to change and adapt to a future of constrained energy resources, global warming and evolving consumer expectations. He is well known and respected throughout the energy industry and regularly contributes to leading energy market publications. He also has a passion for rugby and has played semi-professional rugby at a high level including many representative honours both in the UK and around the World. Follow Me On Google+ View all posts by Chris Hurcombe →

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