Electricity Contract Terms: Fees, Renewal and Cancellation

2. Contract Length and Start Date

Electricity contracts may have different durations. The appropriate term depends on the offer and your circumstances.

A longer agreement may provide a consistent contracted supply rate for a specified period, but it can reduce flexibility if you want to change plans before the contract expires.

A shorter agreement may offer more flexibility, although the available rate and renewal conditions could differ.

Before signing, identify the following dates and provisions:

• When the agreement begins.
• When the contracted rate becomes effective.
• When the agreement expires.
• Whether the rate applies for the full contract term.
• Whether a separate minimum commitment period exists.

If you expect to move soon, pay particular attention to the contract's relocation and cancellation rules. Do not assume that moving automatically releases you from every contractual obligation.

3. Early Termination Fees

An early termination fee is a charge that may apply when you end an electricity contract before the agreed expiration date.

Not every electricity plan includes this fee. Where it does apply, the amount and conditions should be stated in the contract.

When Can an Early Termination Fee Apply?

Depending on the agreement, a fee may apply if you:

• Switch suppliers before the contract ends.
• Cancel a plan before completing the required term.
• Close an account without meeting the contract's cancellation conditions.

Some agreements include exceptions, such as specific relocation circumstances. Others may have different rules for residential and business customers.

How to Evaluate the Fee

Suppose an electricity contract includes a hypothetical early termination fee of $100. If switching to another plan would save an estimated $12 per month, it would take more than eight months of those savings to offset the fee.

This is a simplified illustration, not a recommendation to switch. The calculation excludes other fees, possible rate changes, and differences in contract terms.

Before cancelling, compare the remaining contract obligations with the realistic potential benefit of the alternative offer.

4. Monthly Fees and Additional Charges

The advertised electricity rate may not represent the complete cost of the plan. Some contracts include charges that increase your total supply expense.

Monthly Service Fees

A supplier may charge a recurring fee in addition to the price per kWh. Check whether the charge applies every month, regardless of how much electricity you use.

Minimum-Usage Charges

Some plans include minimum-use requirements or additional charges when consumption falls below a specified level. These provisions can affect customers who use relatively little electricity.