Even the best-priced energy deal can turn sour if you’re locked into bad contract terms. Before putting pen to paper, make sure you’re not agreeing to hidden clauses, auto-renewals, or penalties that can cost you down the line. Here’s what to watch — cut in simple, clear sections for fast reading.
Auto-Renewal Clauses
What it is: Contracts that automatically roll over if you don’t act before the end date — often at a higher “evergreen” rate.
Why it matters: Forget to renew and you might be trapped with unexpectedly high costs.
Downside: Some suppliers add a hefty margin in rollover rates.
Best for: Busy owners — only if the contract gives you ample notice and lets you opt out easily.
Bandwidth & Swing Limits
What it is: Clauses that penalise you if your usage swings too much from your estimate (e.g., more or less than ±10% of expected usage).
Why it matters: Businesses with unpredictable demand (seasonal, growth, etc.) can face extra charges.
Downside: Spiky usage can hit you with surprise costs.
Best for: Buyers who have steady usage patterns, or only with flexible terms and generous swing allowances.
Early Termination & Exit Fees
What it is: Fees or percentages charged if you end the contract early.
Why it matters: Business changes (move, downsizing, new facility) could force you out before term ends — and cost you.
Downside: You could pay thousands to break a contract if unplanned changes happen.
Best for: Businesses locked into stable operations — or ensure there’s a reasonable exit clause (e.g., prorated or scalable).
Pass-Through Carve-Outs & Undefined Costs
What it is: Contracts that exclude future charges (e.g., carbon fees, new regulatory costs, extreme weather surcharges).
Why it matters: If the contract doesn’t clearly cover all potential charges, your supplier could pass through whatever comes next — and charge you extra.
Downside: You pay more later, even when you thought your price was “fixed.”
Best for: Buyers who insist on clarity — ask exactly what’s included, and flag any carve-outs.
Change-in-Law or Force Majeure Clauses
What it is: Clauses allowing the supplier to adjust prices if laws or circumstances (like extreme weather or tariffs) change.
Why it matters: You could face surprise cost hikes, even mid-contract.
Downside: Unexpected regulatory or market shifts become your responsibility — even if you thought you were “fixed.”
Best for: Buyers who need control — negotiate that changes trigger a re-bid or share burden reasonably.
Hidden Minimums or Credit Requirements
What it is: Some contracts require minimum consumption levels or substantial credit/deposit obligations.
Why it matters: You may get locked into rates that only work if you stay above a usage floor — or worry about hefty deposits if your credit isn’t stellar.
Downside: Especially harmful for small or growing businesses.
Best for: Buyers who verify deposit terms and ensure contract matches real-world usage.
Key Contract Traps at a Glance
| Trap | What It Means for You | Red Flag to Watch For |
|---|---|---|
| Auto-Renewal | Higher costs if not canceled | Rollover at punitive rates |
| Bandwidth Limits | Penalties for usage swings | Narrow swing tolerance (±5–10%) |
| Early Exit Fees | Big cost if plans change | No prorated release or escape option |
| Pass-Through Carve-Outs | Hidden future cost exposure | “Except as provided in Exhibit A” |
| Change-in-Law | Unexpected price shifts | Suppliers can reprice mid-contract |
| Credit/Min Use | Financial pressure if usage shifts | High deposits or minimum KWH levels |
How to Protect Yourself
- Read the fine print — understand every clause.
- Ask for revisions — insist on removing or easing bad clauses.
- Set reminders — note contract end dates to avoid surprise renewals.
- Confirm what’s “all-in” means — see also Understanding Your Electricity Bill.
- Use a broker for help — link to Working With Energy Brokers and Consultants.
👉 Bottom line: A great rate is useless if you’re trapped in a bad deal. Vet your contract: no surprises, no auto-renewals, clear included charges. Protect your business before signing.