Whether your business has found itself trapped in the same expensive ‘rollover’ electricity contract for years or you’re simply not happy with the service your current supplier has provided, knowing how to cancel your business electricity contract is essential. However, due to the structure of the energy market in the UK, terminating your contract and switching to a new energy supplier can be tricky if you don’t have the right expert help.
Business electricity contracts
Business electricity contracts in the UK are typically set for a fixed period of time – generally at least 12 months, with other agreements lasting for up to three years. On the face of it, your business is locked into any agreement it signs up to until the contract expires. With the vast majority of energy contracts automatically renewing after the initial contract term, understanding your contract and, specifically, how and when you can terminate your agreement is crucially important when it comes to switching providers and finding the best possible deal for your business.
In this post, we look at how to go about cancelling your electricity contract, including easy-to-follow termination and switch steps, how to construct a properly written termination letter for electricity suppliers and how to switch to find a new electricity contract to best suit your business.
How do electricity contract terminations and renewals work?
Unlike domestic electricity contracts – where switching providers is relatively simple – the fact that practically all business energy contracts are fixed-term tariffs that typically renew automatically when the contract is coming to an end makes the process of cancelling your current corporate electricity contract and switching to a new provider potentially tricky.
By far the most common mistake when managing a business’ energy procurement needs is missing these automatic renewal dates. Simply forgetting to send a letter of termination during this period can lead to a business being unwittingly locked into another long-term contract, often unknowingly accepting price increases, with a provider the organisation is not happy with.
Business electricity contract
When your current electricity deal is coming to an end, it’s important to remember that, for the majority of businesses, it is not the responsibility of your current energy supplier to remind you that your contract is coming towards its end date and that an automatic renewal is in place and ready to be activated. In this vein, suppliers will usually not remind you that a letter of termination is required if you wish to avoid renewal and find a new provider. If your supplier does get in touch, it is usually to provide you with your renewal electricity prices, but this is typically after your minimum notice period has already lapsed, leaving you stuck with your current supplier on their terms.
However, this is not strictly the case for all businesses in the UK. Since 2015, energy watchdog Ofgem has made it compulsory for energy suppliers to send reminders to all small ‘microbusinesses’ at least three months before the end of their current energy deal. This reminder letter must include details about terminating your current contract and any potential increases in prices involved with the automatic contract renewal process. Your company is classed as a microbusiness if it:
- employs fewer than 10 employees and has an annual turnover no greater than £1.7 million (or)
- uses no more than 100,000 kWh of electricity per (or)
- uses no more than 293,000 kWh of gas per year.
Unfortunately, if your business is not classified as a microbusiness, your energy supplier has no obligation to send you a renewal letter or reminder, meaning the onus is on you to keep an eye out for deadlines and properly manage the terms and conditions of your current contract.
How to cancel your business electricity contract
When it comes to cancelling your business electricity contract and switching to a new supplier without having to pay a penny, there are three easy-to-follow steps you need to take.
- Terminate your existing contract – In order to do this, you will need to find out the official end date of your current electricity contract and ensure you send a termination letter (see template below) during the notice window of opportunity outlined in your agreement. This will prevent an automatic renewal of your contract on potentially increased terms and will allow you to start shopping around for a new deal with a different supplier. But remember, once you do terminate your existing contract, finding a new supplier as soon as possible should become a priority. This is because an expired contract with no new agreement in place invokes ‘out of contract’ rates for your business. This could see you paying double your usual rates.
- Shop around for a new supplier – once your letter of termination has been accepted by your current electricity supplier, it’s time to start searching the market for the best new deal. Using a specialist price comparison website, such as Utility Bidder, can be a great way for you to find an improved electricity rate for your business with a new supplier. Not only do Utility Bidder scour the market searching for the best deals, we will also manage the whole transition process on your behalf, leaving you to concentrate on what matters most – running your business.
- Complete the switch – finally, once you have found the best new electricity contract and supplier for your business, making the move official is all that’s left for you to do. While it’s worth remembering that the switching process itself typically takes longer than it does when switching domestic suppliers, if you use a business energy specialist like Utility Bidder, the process is simple and free of stress. Once new contracts have been signed by representatives of your business, or a legally authorised third party, your new contract will become active from the day after your previous contract expires. With this in mind, it’s always important to take final meter readings on the last day of your old contract and the first day of your new deal.
Electricity cancellation letter
Below is a sample termination letter for electricity suppliers. This can be used as a guide to help you construct your own document.
[YOUR COMPANY HEADED PAPER]
[insert business name, registered address and company number]
To whom it may concern,
On behalf of [insert business name], I wish to formally terminate our [current electricity suppler’s name] supply agreement as of [insert contract end date].
Our Meter Point Reference Number: [insert Meter Point Reference Number]
Our Termination Date: [insert contract end date]
Our Supply Address: [insert company address]
This letter has been sent to you to ensure the business can now switch to a new supplier if we wish to do so when our current agreement ends.
Please ensure you provide us with written confirmation that you have received this notice of termination as soon as possible.
[position held in business]
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