The structure of the UK energy market ensures switching to a new contract is difficult. Use our guide to save time, terminate your current contract and initiate a new agreement.
The Process of Switching Provider – Overview
Unlike the residential market, it’s not straightforward to simply change to new energy rates in the business market. Every business tariff is for a fixed length of time for at least 12 months. Some contracts are for three years or more, and you’re tied to this agreement until it expires.
Smaller businesses receive reminders set out by the regulator Ofgem from their current supplier. Within this two-page letter, are details about terminating your current contract and the potential pitfalls if you ignore its contents.
If you don’t fall under the “micro business” clauses, then the onus is on your company to manage the terms and conditions set out.
There are just three basic steps to change your energy supplier:
The Three Steps to Switch Business Electricity Supplier
- Step 1: Terminate Your Existing Agreement
- Step 2: Check the Latest Prices Available
- Step 3: Move to Your New Provider
Once you have completed these steps, your new rates are effective when your new contract begins.
Step 1: Terminate Your Existing Agreement
If you don’t terminate your existing agreement, your current supplier will extend it for another term.
This extension may not sound like a poor deal except that they’ll increase your rates. We have seen 100% increases for the follow-on contracts, although 30% increases are more common.
If you don’t exit your contract, you’ll see substantial increases in your unit price and standing charge.
Pitfalls in the Termination Process to avoid
- You only have a specific time to invoke the termination.
- If you don’t terminate, your contract will be rolled over for at least 12 months.
- An expired contract with no new agreement invokes “out of contract” rates.
Rollover and Out of Contract Rates
The worse case scenario for a business owner is if the termination goes ahead, but you haven’t signed a new contract. In these circumstances, you’re in no contract at all, and the energy companies have special rates that they will apply.
These are termed “out of contract” rates, and these are even higher than the rollover rates. These tariffs are the most expensive available and will be paid until you sign up for a new contract.
Most business and commercial customers have energy contracts for fixed periods lasting one year or longer. Within the contract wording, will be a specific period of time when you can invoke termination and switch to another supplier.
These terms are also shown in your renewal letter that is sent by some suppliers. If you miss these deadlines, you’ll be automatically rolled over for another year.
Ofgem brought in new rules for micro businesses so providers must send out renewal reminder letters three months before the end of the contract.
If you’re not in this group, then no renewals or reminders will be sent. Therefore, the onus is on you to check your current terms.
Step 2: Check the Latest Prices Available
Once you have the termination process in hand, you can start to check the whole market for the latest prices.
This analysis in itself could present certain danger depending on the course of action you choose.
Options include obtaining the data yourself, using an online comparison service or using an accredited energy broker. Brokers can often find cheaper deals through their extended relationships although most brokers have similar prices.
Despite this level playing field, they’ll understand which company offers the best prices for your profile and be able to manage the whole process on your behalf.
Ways in Which to Obtain Quotes
Here are the choices you have to find the latest and the best available prices in the marketplace.
- Visit or telephone each of the big six suppliers and ask for a quote. There are other companies available that may offer lower prices, which you could overlook.
- Use an online service of a specialist who has the expertise and knowledge to know the best time of year to strike a deal. If you enter your details here, we’ll find you the best prices available for your business.
- Contact an energy broker who can help manage the entire process on your behalf. Their services include pricing; help with reducing your consumption through efficiency and carbon offset credit obligations you may have.
Step 3: Move to Your New Provider
The actual switching process can be longer for a business customer versus the residential market.
Your new contract cannot begin until your existing agreement has expired. If the expiration date is three months from now, then that’s when the new agreement commences.
Obtain meter readings to confirm your final invoice.
The new contract needs to be legally signed by a signatory that’s authorised to do so. There are services that now allow electronic signatures which are accepted by energy companies, although they are limited.
Prices do rise and fall during peak demands for power as the wholesale market adjusts to the UK’s energy requirements.
The winter months usually have the highest prices during the year. Price quotes are usually only valid for 24 hours because of the volatile nature of the industry. If you receive a quote that’s suitable, then it’s best to sign up for it at that time.
Here’s an overview to switching your electricity:
- Terminate your contract within the terms outlined to avoid rollover contracts.
- Get new price quotes and compare them to find the cheapest available.
- Ensure you sign up to a new agreement to avoid out of contract rates.
If you need any guidance or help, please call our energy team on 0800 690 6008.