subject: Understanding Your Electricity Contracts [print this page] It s extremely important to understand the terms and conditions mentioned in your electricity contracts so that you do not overpay on the monthly bills or any other form of penalty fees.
Moreover, if you think your bills are regularly exaggerated and are beyond your budget for electricity and gas bills, then, as a UK consumer, you can switch suppliers, you have the legal right to switch energy suppliers and buy gas and electricity from a company you want to.
Knowing the contract also helps you to understand its terms and policies so that you know when you can terminate the contract, in case you are interested to switch to another company or the procedure to extend the existing contract further.
Generally, electricity contracts are either fixed term contract or rolling contract.
For a fixed term contract, you are legally obliged to stay with a supplier for an agreed period of time, which is normally between one to five years. Within this period, you cannot switch to another supplier and are also obliged to pay the bill every month, even if your business is not generating sufficient profit.
If you are interested in terminating the contract before the stipulated date, you can send an official letter and let the supplier know that you are willing to end the contract. They will then calculate the penalty fee, which is dependent on the time that is remaining until the termination date. The electricity company will ask you to pay the amount as a penalty fee before you could terminate the contract with the existing supplier.
Once you have paid the penalty fees, you are free to switch to any supplier of your choice.
However, the other type of electricity contract is called rolling contract. A rolling contract does not terminate on its own as it is not time bound. At the end of every term, the contract is renewed by default unless you contact the company and express your willingness to do so.
If you want to switch suppliers under a rolling contract, you may not have to pay a penalty fee.
Knowing the terms and conditions of your electricity contracts can help you to decide when and how to find another electricity company, who can offer you a cheaper deal to match your business requirements.
