Electricity Renewals

Why shouldn’t I accept the renewal offer?

If your energy contract is coming to an end, you might be wondering what to do next. Many people, who are satisfied with their current deal and energy provider, simply decide to renew the contract with the same supplier.

While this is an easy solution, it usually isn’t the best one.

Do you know why?

In fact, suppliers often take advantage of people choosing the easy way and they send out slightly higher prices in renewal letters. The prices they offer when your current contract is ending tend to be 2-3p per kWh more expensive. Many customers do not read the offers carefully and they agree without checking whether other suppliers have more competitive prices, or if many their current supplier also offers a cheaper tariff. Consequently, they often find themselves paying £100 to £1000 more per year for their energy.

Furthermore, it is a common practice for the biggest suppliers to place customers, who do not react to their contract ending, on deemed rates. These tariffs can be double normal rates so they are not a good alternative to being rolled over.

Now you should realise that thinking about your contract renewal and looking for the best energy deals instead of simply accepting the renewal offer is extremely important. Keep reading to find out more!

Why do contracts get rolled over?

Most of the Big Six energy suppliers do not use rollover contracts anymore because Ofgem encouraged them to. Instead of rolling customers over, the Big Six companies put them on deemed tariffs that might be more expensive but unlike rollover, contracts can be ended or changed to a different tariff for free.

Nevertheless, if you are with any other provider, you will most likely be at risk of being rolled over if you forget to react to your contract coming to an end. The main reason for suppliers putting customers on rollover contracts is to generate profit. They know that customers often forget about the fact that their contract is about to expire, and thus they do not do anything about it. Even though customers get annoyed about rollover contracts’ prices being very high, for suppliers placing someone on a rollover tariff simply means getting more money.

What are rollover and deemed contracts?

As has already been mentioned, if your current energy contracts ends and you do not react, you will either be rolled over or placed on a deemed contract. Have a look at the table below to find out what the differences between them are.

 type of contractcharacteristics
rollover contractA new contract that your supplier will sign you up to if your existing contract is due to end and you do not cancel or renew it.   Rollover contracts include high energy rates and usually last one year.
deemed contractA contract that you will be placed on if you haven’t agreed on a new contract with your supplier.   Often put in place when you move into new premises and start using energy without getting a contract first.   Deemed contracts are amongst the least competitive.

What are the laws surrounding rollover contracts?

Many customers complain about rollover contracts being unfair. While that might be true, they are not against the law. There are, however, a few rules that energy providers need to adhere to:

  1. Around 60 days before your contract ends, the supplier must send you a letter with the renewal offer.
  2. The letter also needs to explain the conditions of the rollover contract that you will be put on if you don’t renew or terminate your current contract.
  3. The maximum duration of the rollover contract cannot exceed 12 months.
  4. Each supplier offers you a window after sending the renewal letter, during which you have to tell them that you don’t want to accept it.

How to avoid being rolled over?

It is easy to fall into a rollover contract but luckily it is also easy to avoid that. If your supplier still uses rollover contracts and you are a micro-business, all you have to do to avoid being placed on an expensive rollover contract is submit a termination notice on time. Each supplier can have a different policy for customers submitting termination notice but in line with what Ofgem recommended, usually, you have to give the notice no more than 30 days before your contract ends.

Many suppliers, however, give you the chance to secure a new contract even several months before your current one finishes. If you do that, you won’t be able to start it and get new rates before the existing contract ends, but you will get the opportunity to secure the best prices.

When you realise that your current contract is about to end, it is important that you take action. If you terminate your existing contract but you do not get a new one with your current or a new supplier, you will face out-of-contract rates. These rates tend to be very expensive as there is no limit on how high they can be. As Business Juice writes ‘Out-of-contract rates can be more than double the typical market rate from your supplier – for example, a standing charge of £1 a day, and a unit rate of 20p/kWh, compared to a typical rate of 25p a day, and 11p/kWh.’

What to do if you have been rolled over?

You should do everything you can to avoid being rolled over because, regrettably, once that happens there isn’t much you can do. If you miss the chance to terminate your existing contract and get a new deal, you will have to come to terms with higher rates and being stuck with the rollover contract for as long as one year. Being locked in for 12 months and having to pay expensive energy rates can have a detrimental impact on your business so you will have to undertake steps to make sure that this never happens again.

If you want to avoid being rolled over and you want to get help keeping track of everything related to your energy contract, seek advice from an energy broker!

When and where to submit my contract termination?

It is very common for customers to miss their contract renewal date or do not submit their contract termination on time. Submitting your contract termination at the right moment is extremely important because if you don’t do it, your contract will automatically renew itself. When that happens your current contract will be rolled over and you might see yourself stuck with a deemed contract, which includes high energy prices and makes you stay with the supplier for a year or even longer.

How to know my contract is ending?

Your supplier will likely send you a renewal offer. Do not ignore any letters and emails from them as the information about your contract coming to an end, and consequently, your energy prices rising can be disguised under various headlines.

Moreover, when you first switch to a new supplier you should note when your contract ends and keep track of it so as not to miss the deadline for submitting contract termination.

Do I need to pay exit fees?

If your contract is coming to an end, you will not have to pay termination fees. For domestic customers, there is a margin of 49 days, introduced and monitored by Ofgem, before your contract ends when you can choose a different supplier or just end your current contract without paying anything. For business customers, if you want to avoid paying exit fees, you will normally have to wait until your contract expires. Business gas and electricity contracts are usually set for a fixed period of time.

If you want to leave your contract early even though you had committed to staying with the supplier for a certain period of time, you might have to pay exit fees. How much you will need to pay varies based on the supplier you’re getting your energy from.

Whether or not you will have to pay exit fees might depend on the energy contract you are on. The main types of energy tariffs are:

energy contract typefeatures
Fixed rate tariffstend to last between 12 and 24 monthsprotect customers from rising energy pricesusually include exit fees if you want to end the contract before the end of 12/24months period
Variable rate tariffsmore flexible but the energy prices fluctuateno specific contract end-datetend not to have exit fees

How to avoid paying exit fees?

If you want to leave your fixed-term tariff before the contract expires, here are some tips to help you avoid paying the exit fee.

  1. Choose a fixed energy tariff without exit fees.
  2. If you are a domestic customer, switch in the last 49 days of your contract.
  3. If you’re moving home, simply change the address instead of terminating the contract and paying exit fees.
  4. Ask the supplier if they will waive the fees if you choose a different tariff from their offer.
  5. Calculate whether switching to a new tariff with more competitive prices early and paying exit fees can cost you less than staying on your current contract.

How to submit my contract termination?

When you receive a reminder from your supplier that your contract is about to finish, make sure you react immediately. Otherwise, you might end up forgetting about it. If you do not want to stay with your current provider and instead want to look at what other energy companies offer, you need to submit a cancellation notice. This notice should:

  • include your business energy account number
  • explicitly say that you want to terminate your contract
  • be signed by you
  • be sent to the supplier before the contract’s expiry date.

When and where to submit contract termination with major energy suppliers?

When to submit your termination notice can be different for each supplier. To help you keep track of it, the table below contains the information about minimum and maximum periods of notice with the major energy suppliers in the UK. In the table you can also find information on where to submit the notice.

supplierminimum period of noticemaximum period of noticewhere to submit the notice
British Gas30 days60 daysmybusinesscontract@britishgas.co.uk
CNG30 days30 daysterminations@cngltd.co.uk
EDF30 days30 daysonline form
EON30 days30 dayssmecontractterminations@eonenergy.com
Npower30 days30 daysto be consulted with the Customer Service team at 0800 073 3000
Scottish Power30 daysNo maxcontactus@scottishpower.com
Utilita Energy30 days30 daysto be consulted with the Customer Service team at 03330 156 662
Yu Energy30 daysMicro-businesses can terminate anytimeto be consulted with the Customer Service team at 0115 697 1153

What to do after submitting contract termination?

So once you’ve submitted your contract termination you might be wondering what to do next. When the process of ending your current contract is finalised, you can start looking for a new supplier and a new energy deal. Choosing the right tariff is something you shouldn’t overlook as it can save you a lot of money on energy bills each year. To find the best deal, you have to compare gas and electricity prices and various available energy deals. A few popular ways to switch to a new supplier are:

  • price comparison websites
  • energy companies’ websites
  • calling energy suppliers
  • using a price comparison service via phone
  • talking to a salesperson
  • energy auto-switching services.

Finding a new supplier with Energy Solutions

Getting a good energy deal and an energy contract that corresponds to your business’s needs is very important, but people do not always have the time to browse and compare available energy tariffs. That’s why getting help from an energy broker is a good idea.

Energy Solutions has been a trusted energy broker for over two decades and it offers unbeatable expertise and experience when it comes to getting the best deals for commercial electricity, gas, and water contracts. Energy Solutions works with the majority of suppliers operating in the UK.

Get in touch today to start saving time, money, and a whole lot of effort.’

How to get Accurate Business Energy Quotes

When comparing business energy quotes, you will want to ensure that the quotes you receive are accurate and suitable for your business and its needs.

Unlike domestic energy tariffs, business energy contracts have no cooling off period. So, once you’ve signed up for your new contract, there’s no turning back. That’s why it’s so important for you to make informed decisions that will lead you to the right choice for you.

Before you even start to research new contracts and options, it is important to gather all of the information necessary for those to give you the best results. To ensure that you get the most relevant results when comparing energy tariffs, there are a number of things you should know and, and have steady access to when you may be asked by those searching for deals on your behalf. This includes

•    Your Meter Point Administration Number (MPAN) for your electricity meter; You should be able to find this on your most recent energy bill. This may be marked as “Supply Number” and is a 13 digit number. If you are unable to find this on your bill, you can contact your local Energy Supplier.

•    An estimate for your yearly energy usage. This should be included in your renewal letter (if you receive one). Companies ask for this so that they are able to make an assessment on how much electricity you will use throughout your contract; this means that they can focus on what type of contract may be best fitted for you, whether long term, fixed-rate or variable rate.

•    General information about your business for credit checking; This includes your company name, Individual Taxpayer Identification Number (ITIN) – This is usually found on the rental application or consent to background checks forms that you will have completed before entering the property – the business bank account linked to your property alongside payments made to the business credit bureaus. You may also be able to turn in recent credit checks made on your business by the likes of The Dun & Bradstreet or other organisations.

•    Location(s) being supplied. If you have more than one property using the same contract, it will be important that all of these locations addresses are listed in full. Without this, one location may go without electricity after a switch due to not being listed.

•    Previous gas and electricity bills. This will help to establish any unexpected charges that may have been made and how to avoid them going into your new tariff, as well as a helpful way to find how regularly you were paying your bills; monthly, quarterly, yearly, and if there are any outstanding payments or repayments to be made to you before ending your contract.

•    Your current contract end date. This is used to gather information on when you will look to have another contract come in and how a business can work to avoid you going even 24 hours without the crucial supply to your business.

•    For half hourly electricity meters – your half hourly usage data. You can request this from your supplier at any time.

•    A signed letter of authority – this allows us to speak to suppliers on your behalf, and get any missing information and request prices. A Letter of Authority (or LOA) is primarily for brokers to manage your energy supply by giving them the rights to take action on your behalf. You can find more information about LOI’s here, to keep you safe in signing such contracts.

Do loyal customers get the best prices?

Many people assume that if they stay with the same energy company they might get a deal for loyal customers and pay less for their energy supply. After all, that’s often the case with restaurants or shops – loyal customers get rewards and discounts. Unfortunately, that’s not the case with essential services such as energy, and loyal customers often end up paying more. 

Do you want to know why?

Often if your energy expires and you haven’t changed a supplier or chosen a new deal with your existing one, your energy provider puts you on a more expensive tariff. Therefore, switching providers and comparing available tariffs is always better than simply staying with your current one.

Energy suppliers know that customers often forget about the fact that their contract is about to finish, and hence they use that to make money.

What is the loyalty penalty?

Let’s look at the problem in more detail.

The loyalty penalty is the term used to describe the cost of being a long-standing customer, compared to new customers who sign up for the same services.

When does it occur?

In the energy market, as has already been mentioned, the loyalty penalty happens when loyal customers are rolled over on more expensive tariffs once their energy contracts come to an end. Consequently, they pay more for energy than those who just switched to the same supplier.

Does the loyalty penalty only exist in the energy market?

Not at all! The loyalty penalty can be observed in many markets and the price customers pay as a result of it can vary. Have a look at the table below to see how much you can end up paying if the loyalty penalty is imposed on you in some of the popular essential-services markets:

MarketAverage annual cost of the loyalty penalty
Fixed rate mortgage£439

 Based on data published by Citizens Advice

Do many people pay the loyalty penalty?

If you realise that you’ve been paying more for your essential services as a result of the loyalty penalty, don’t worry – you’re not the only one.

  • Almost 13 million households automatically renew their home insurance each year.
  • Over 1 million mortgage holders could save money if they switched.
  • Around 12 million households are currently paying rates of standard variable energy tariffs.

Is anyone more likely to be paying the loyalty penalty?

Although the loyalty penalty can affect anyone, studies show that certain groups are more at risk of having to deal with it than others.

grouprisk factors
Elderly aged 65 and overMore likely to keep the same energy contract for several years. More likely to be overwhelmed by numerous energy suppliers and tariffs, hence staying with their current one. Lower cognitive functions. Likely to find the switching process difficult.
People on low incomesLess active in essential services markets. Lower levels of confidence.
People who did not go to universityLower understanding of the switching process and available products. Less active in essential services markets.

Why do people face the loyalty penalty?

There are several customer behaviours that make people face the loyalty penalty. The main factors that often determine it are:

  1. Not knowing what the best deal is

Many people who are currently satisfied with their energy tariff and rates they’re paying, simply assume that it’s a good deal and they do not make the effort to look at other contracts available. In turn, they decide to just stick to what they know and end up paying more than they would if they switched to a new provider.

Moreover, people often feel overwhelmed by a large number of tariffs and energy deals available. They delay choosing one until it’s too late and they’ve been rolled over to a more expensive rate that they’re stuck with for a year or longer.

  1. Not realising that there is a penalty

Getting rewards for being a loyal customer in some sectors is a common practice, so many people assume that that’s also the case with the energy market. Customers often do not realise that they could be penalised for being loyal to their supplier.

Moreover, many people just assume that if they do not choose a new energy deal, they will simply keep paying as much as they currently are. They are simply not aware of what rollover contracts are.

  1. Wanting to avoid complex pricing structures

Comparing hundreds of different energy deals can be overwhelming as each of them offers different rates. Often, understanding pricing structures and what charges are included in the contract can be tricky. Hence, in order to avoid that, many people decide to stick with what they know already. If they are happy with their existing rates, they decide to just stick to that instead of analysing how much they would pay if they switched suppliers.

  1. Not getting all the information

Most energy companies hide the information about the loyalty penalty. Even though they inform the customers that their contract is about to expire, and they tell them what their rates will be after that, suppliers know that customers are likely to ignore that information and they do not make an effort to make all that clear.

Moreover, energy providers often do not tell the customers that their standard variable tariff is the most expensive one. As the tariffs have ‘standard’ in the name, many customers assume that that’s what most people go for and that they offer regular rates.

How to avoid paying the loyalty penalty?

The best solution to avoiding the loyalty penalty is to often compare available energy deals and regularly switch suppliers. The energy prices change all the time so even if you’re satisfied with your current contract when it expires you might be able to get a better deal. Many people think that switching energy supplier requires a lot of effort, and hence they just stick with their current supplier for several years.

That could not be more wrong!

Switching suppliers is extremely easy and quick. If you want someone to help you with the process and find the cheapest electricity or gas deals for you, you can seek advice from an energy broker.