How to Avoid Rollover Contracts and Out-of-Contract Energy Rates

A rollover happens when a fixed-term business energy contract ends and renews automatically for another fixed term, usually 12 months and often at a higher rate. Out-of-contract rates are what some suppliers charge when your fixed term ends without a new deal in place. Ofgem says both are usually more expensive than a fixed-term contract. Both are legal and avoidable with a little planning.

This guide explains how rollovers work, which rules apply to your business size, what to do and when, how to write a termination notice, and what to do if you've already been rolled over.

Key takeaways 

• Doing nothing at the end of a fixed-term contract is what triggers a rollover or out-of-contract rates.
• You don't have to wait for your renewal letter. With Love Energy Savings, you can lock in your next contract up to 18 months before your current one ends.
• Since 1 October 2022, microbusinesses haven't had to give notice to switch at the end of a fixed term (except on evergreen contracts), and a microbusiness rollover can't last more than 12 months.
• Writing to your supplier before your end date is still the simplest way to stop a contract from being extended.
• Small and larger businesses must follow the notice period and method set out in their contract, so check it early.
• Microbusinesses already on a rollover or out-of-contract rate can switch without a fee or notice. Other businesses should check their exit terms first.

What is a rollover contract?

A rollover contract, also called an auto-renewal contract, is a business energy contract that renews itself when the fixed term ends because you haven't agreed a new deal or switched supplier. The new arrangement is for another fixed term, usually 12 months, and may be at a higher rate.

The rollover is written into the terms you agreed to when you signed. Your supplier sets the new price, and it hasn't been tested against the rest of the market, which is why a rollover rate is rarely the best price available to your business at that point.

If you're a microbusiness, your supplier must send you renewal information, including renewal prices, before the contract ends. That renewal statement must also tell you that you can write to your supplier at any time before the end date to stop the contract from being extended for a further fixed term.

What are out-of-contract energy rates?

Out-of-contract rates are the prices some suppliers charge when your fixed-term contract ends, and you haven't agreed a new deal or been moved onto a new fixed term. There's no end date, so the rates apply until you agree a contract or switch. Like deemed rates, they're usually more expensive than fixed-term contracts.

Because out-of-contract rates aren't a fixed term, Ofgem's switching guidance confirms you can move to a new supplier at any time. The real cost is staying put: every month on an out-of-contract rate is a month of paying more than you need to.

You'll often see "out-of-contract" and "deemed" used to mean the same thing. Strictly, a deemed contract applies when you use energy without having agreed to any contract, for example, when moving into new business premises or if your supplier goes out of business. Read more about how deemed contracts work.

Why rollover and out-of-contract rates cost more

When you shop for a new contract, suppliers compete for your business. A rollover or out-of-contract rate skips that step: your supplier sets the price, and you pay it until you act. And because business energy isn't covered by the price cap, there's no ceiling on what a default rate can be.

What a higher unit rate could cost you

The quickest way to see the impact is to multiply the difference in unit rate by your annual usage. A typical small business uses around 10,000 kWh of electricity a year, so every extra 1p per kWh adds £100 a year before standing charges, the Climate Change Levy and VAT.

Which rules apply to your business?

Your protections at the end of a contract depend on the size of your business. Ofgem gives microbusinesses the strongest protections at renewal, while small and larger businesses rely mainly on the terms of their contract.

How to stop your business energy contract rolling over: step by step

Step 1: When you sign your contract

Write down your end date, your notice period, how notice must be given and what happens if you do nothing: a rollover, out-of-contract rates or an evergreen contract. You'll find these in your principal terms. Set reminders for 18 months, six months and three months before the end date. If you have more than one meter, record each one separately, as end dates can differ.

Step 2: Up to 18 months before your end date

Start looking early. You don't need to wait for your supplier's renewal letter: with Love Energy Savings, you can agree your next contract up to 18 months before your current one ends. Your existing contract carries on as normal and the new one starts the day it finishes, so there's no overlap and no exit fee. If your current contract needs notice to end it, you still have to give it, and we can do that for you.

Locking in early gives you price certainty and takes the deadline pressure off, but it also means fixing a price before you know where the market will go. If prices fall after you sign, you won't benefit, so think about how much certainty your business needs and how long to fix your business energy for.

Step 3: Six months before your end date

If you haven't locked in yet, confirm your dates. You can usually find your contract end date on your bill. Most suppliers' renewal windows open between one and six months before the end date, but you don't have to wait for yours. Gather what you'll need for quotes: a recent bill, your annual usage in kWh, your MPAN or MPRN, and your current unit rates and standing charges.

Step 4: Three months before your end date

If you still haven't agreed a new deal, start comparing now. Fixed-rate contracts include a switching window that opens a few months before the end of the contract, and Citizens Advice says your supplier should contact you about three months before your contract ends. If you haven't heard anything, ask your supplier for its renewal terms. Then compare business energy renewal quotes from other suppliers so you know what the market is offering.

Step 5: When your renewal letter arrives

Treat the renewal letter as an offer, not a done deal. Check the renewal unit rate, standing charge and contract length, and look for what happens if you don't respond. Compare it with your other quotes. If your current supplier is more expensive, tell them what you've been offered and ask if they can do better. If you've already locked in a new contract elsewhere, you don't need to accept anything, but make sure your supplier knows you're not renewing.

Step 6: Before your notice deadline

Tell your supplier in writing that you don't want your contract renewed or extended, even if you've already agreed your next contract. If you're a microbusiness, you don't need to give notice to switch at the end of a fixed term, but writing before the end date stops your contract being extended. If you're a small or larger business, your notice must arrive within the window and in the format your contract sets out. Ask for written confirmation.

Step 7: Agree your new contract

If you haven't locked in early, agree your new contract now so it starts on the day your current one ends. Before you commit, check the unit rate, standing charge, contract length, exit fees and any broker fees shown in the principal terms. There's no cooling-off period on business energy contracts, and a contract agreed over the phone is binding, so read the terms before you say yes.

Step 8: On your end date

Take meter readings on the day your new contract starts and send them to both your old and new supplier. Check that your first bill shows the rates you agreed on, and set a reminder for your next end date straight away.

How to write a termination notice

Your contract will say how notice must be given, for example by email, by letter or through your online account. Use exactly that method, because notice sent another way may not count. Your notice should include:

• your business name and registered address
• the supply address for each site
• your account number
• your MPAN (electricity) or MPRN (gas) number
• your contract end date
• a clear statement that you don't want the contract renewed or extended
• the name and position of the person giving notice, and the date
• a request for written confirmation

Here's a template you can adapt:

Subject: Notice not to renew, [business name], account [number]

Dear [supplier name],

We are writing about our business [electricity/gas] supply at [supply address], account number [number], MPAN/MPRN [number].

Our current contract ends on [end date]. Please accept this letter as notice that we do not wish our contract to be renewed, rolled over or extended for a further fixed term. We will arrange a new contract to start when our current contract ends.

Please confirm in writing that you have received this notice and that our contract will not be renewed.

Yours faithfully,

[Name], [position], [business name], [date]

Keep a copy of the notice, the date you sent it and any confirmation you receive. If you don't get a reply within a week, chase it.

Prefer not to handle it yourself? When you sign our letter of authority, we can issue termination notices and opt you out of automatic renewals on your behalf. It doesn't allow us to agree to a contract without your consent.

Already on a rollover or out-of-contract rate? What to do now

1. Check your latest bill, or ask your supplier, which arrangement you're on, what you're paying and whether it has an end date.
2. If you're a microbusiness on a rollover or out-of-contract rate, you can switch at any time without paying a fee or giving notice.
3. If you're a small or larger business on out-of-contract or deemed rates, you can switch at any time. If you've been rolled onto a new fixed term, check the exit terms before you move.
4. Check whether you received renewal information before your contract ended. If you didn't, complain to your supplier. Micro and small businesses can take unresolved complaints to the Energy Ombudsman.
5. Get quotes, and ask your current supplier whether it can move you to a cheaper tariff.
6. Keep paying your bills while you sort things out. A supplier can object to a switch if you owe it money.

Managing end dates across several sites

If your business has more than one site or meter, each supply can have its own end date, notice period and default terms, so it's easy for one meter to roll over while you're focused on another. Keep a simple register of every MPAN and MPRN with its end date and notice deadline, and consider lining up end dates when you renew so you can compare them together. Larger and multi-site users can get tailored quotes through our energy procurement service.

How Love Energy Savings helps you avoid rollover rates

We show you live business gas and electricity prices from our panel of trusted UK suppliers, so you can see how your renewal offer compares before you commit. When you switch with us, we'll get in touch as your next end date approaches, so it doesn't slip past unnoticed. Compare business energy prices in less than 30 seconds.