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Auto renewing contracts are an increasing problem for business owners, and can cause a lot of frustration.
The good news is that you can safeguard your business with some forward planning. In this article we’ll explain what auto renewals are, their disadvantages, and how to avoid them.
An auto renewal contract is when an energy broker automatically puts a client on a new contract when their existing one expires.
This can either be with the existing supplier or an entirely new one.
Auto renewals are often done without permission, meaning businesses get a nasty surprise when they find they’re locked into a new contract. And as business energy contract ‘cooling offperiods’ aren’t mandatory like for domestic energy, there’s typically no option to cancel.
Some energy brokers have come under fire for implementing auto renewal contracts, with the Energy Ombudsman advising that brokers need to do more to remind consumers about the agreements in place.
Auto renewing contracts can sound like a good idea in theory, but not so much in reality.
Here are some reasons why you should avoid auto renewing energy contracts.
● They’re expensive. Auto-renewing contracts often renew at less competitive rates, meaning you end up paying more for your gas and electricity
● They’re hard to get out of. Once you’ve renewed your contract, you’re stuck for several years. These contracts are legally enforced, making them hard to get out of without paying expensive penalties
● You might end up in a contract that doesn’t align with your values. For example, if sustainability is important to you, there’s no guarantee that the broker will take that into consideration
Auto renewals sound scary, but the good news is that there are things you can do to stay on top of the renewal process.
Here’s how to avoid getting stuck in an auto renewing contract.
Amend Your LOA
Before you work with an energy broker, you must sign a letter of authority (LOA). This is a document that gives the energy broker permission to liaise with energy suppliers on your behalf.
There are two levels of LOA - LOA 1 and LOA 2. The first, an LOA 1 only gives energy brokers permission to view your account data.
However, an LOA 2 gives the broker the authority to make changes or sign new contracts without your knowledge, which can result in the power to implement auto renewals.
If an energy broker has given you an LOA 2, you can refuse to sign it.
Check Your Contract
It’s always important to check contracts before signing them, and energy contracts are no exception. Chances are that auto renewals will be buried in the contract, making them tricky to spot.
Look for a clause that says ‘permission to sign supply contracts’ or mention of a ‘do-it-for-you’ service. You can ask for this to be removed before you sign.
If you’ve already signed your contract, check it now for an auto renew clause. If it has one in place, don’t panic. It means you need to be aware of when your contract will renew so you can stay one step ahead.
If you’re not sure if your existing contract allows auto renewals, get in touch and we’ll check it for you – free of charge.
Always Check Your Contract
Some businesses end up getting their contracts automatically renewed as they signed the original agreement that gave the broker authority to sign new agreements on their behalf.
To avoid this, always check the small print before signing a new energy contract and beware of a clause that says ‘permission to sign supply contracts’ or similar.
Know When Your Contract Will Expire
By knowing when your existing contract is due to end, you can stay in control and work with your energy broker to find a new energy supply agreement.
Your contract details, including the tariffyou’re on, how you pay, and how long your contract runs for, are all on your energy bill.
Work With a Broker That Doesn’t Use Auto Renewals
Clarity is important to us at Tritility. We ensure our clients are 100% happy with the contract they’re on and that they have a full choice of suppliers when it’s time to renew.
This means we don’t use auto renewal clauses. Instead we get in touch with you once your contract enters the renewal window and work with you to find the best supplier based on your budget, values, needs and goals.
And we always ask for your explicit permission before moving you to a new contract.
Some energy brokers tout the benefits of auto renewals, saying they save time on organising new gas and electricity contracts.
However, they’re more convenient for the energy brokers than they are for you.
A good energy consultancy will ensure you always have the final say as to which supplier and contract solution you use.
For any uncertainties about auto-renewals or any part of your energy agreements, we're here to help. Please feel free to get in touch at info@tritility.com