Auto-Renewals | The In's and Out's of Business Energy Contracts

What Are Auto-Renewals in Energy Contracts?

Auto-renewals are clauses written into many business energy contracts that stipulate the contract will automatically renew for a further fixed term if the customer takes no action before the agreement's expiry date. This means that if a business doesn't actively terminate or renegotiate its current deal within a set notice period, it could find itself locked into a new contract (often at less competitive rates).

Many businesses, especially smaller firms that may not have a dedicated procurement or facilities team, can easily overlook this clause. Energy suppliers are legally allowed to include these clauses, and unless the contract is cancelled or renegotiated in time, the auto-renewal becomes binding. This can result in being stuck with outdated pricing structures and potentially higher rates, undermining your cost-saving efforts.

Why Do Suppliers and Some Brokers Use Auto-Renewals?

From a supplier's perspective, auto-renewals offer continuity and reduce the administrative burden of chasing expiring contracts. It allows suppliers to keep customers and helps maintain a predictable cash flow. 

Many businesses are surprised to find that their contracts have been renewed automatically, particularly if they assumed their energy supply would continue on a rolling or variable rate. Instead, suppliers often lock them into fixed terms that can be difficult or expensive to exit.

How to Avoid Getting Locked In

Avoiding an unwanted auto-renewal starts with awareness. The first and most crucial step is to understand the specific terms of your current energy contract. Know your contract end date and the notice period required for termination. This notice period can vary by supplier, but it is usually between 30 and 90 days before the end date.

Once you know your key dates, set reminders well in advance. Some businesses set automated calendar alerts six months before their contract ends to give themselves plenty of time to review new offers, explore the market, and decide about renewal or switching.

Another effective tactic is appointing a third-party energy consultant or broker like Purely Energy to monitor your contract and act on your behalf. We will ensure you're not rolled into a renewal without your knowledge and can help secure more favourable terms with alternative suppliers.

Microbusinesses and Their Protections

While larger organisations may have more resources to manage their contracts, microbusinesses have been given some regulatory protections in recent years. These include clearer communication from suppliers regarding renewal terms, contract end dates, and a slightly more flexible termination process.

Even microbusinesses can fall victim to auto-renewals if they aren't proactive. Don't assume your smaller size exempts you from the standard practices of the commercial energy market. The same diligence is required, regardless of your company's scale.

No Cooling-Off Period

It's important to note that business energy contracts, unlike domestic ones, do not come with a cooling-off period. Once you have agreed to a new contract through renewal or a fresh deal, you are typically bound by it for the full term. There is no grace period to change your mind, so any misstep in the renewal process can have long-term consequences. This makes it even more essential to get the timing and paperwork right.

What Happens If You Miss the Deadline?

If you miss the deadline your supplier will usually renew your contract under new terms. These might not be as competitive as your previous rates and are often set in favour of the supplier. Some businesses pay significantly more for the same service simply because they missed a date or failed to read the small print.

Suppliers may sometimes switch the business onto "deemed rates" or "out-of-contract rates," which are usually among the highest on the market. This often occurs if a termination notice is served but no new contract is secured before the old one expires. These elevated rates can severely impact your bottom line, especially for high-usage businesses.

Taking Back Control

The best way to protect your business is to treat energy contracts with the same scrutiny as any other key supplier agreement. Stay organised, mark key dates, and ensure all renewal and termination decisions are made strategically.

Make contract management part of your operational review process, particularly if you are approaching your renewal window. Don't rely on your supplier to remind you of what's best for your business. Their goals may not align with yours. Instead, take the initiative, shop around, and consider leveraging professional support to handle the finer details. If you're a Purely Energy customer then we can take all this administrative burden from you.

How can Purely Energy Help?

Auto-renewals in business energy contracts can be both a convenience and a costly trap. While they offer continuity for suppliers, they often lead to inflexibility and inflated costs for customers who aren't paying close attention. Purely Energy will never auto-renew you into a contract, we will always let you know that your renewal is due and leave the choice to you!

By understanding how these clauses work, keeping a close eye on renewal dates, and proactively managing your termination process, your business can avoid unnecessary expenses and ensure that your energy contracts work in your favour—not against you.

If you're ready to take control of your energy bills, now is the time to compare quotes and find a tariff that suits your needs.

If you have questions about auto-renewal energy contracts or want help lowering energy costs, contact us at 0161 521 3400 or Info@purelyenergy.co.uk. Alternatively, you can get a quick quote.

Megan Glover of Purely Energy wrote this article. If you have any suggestions or questions, please get in touch with us.