Business energy contract terms to check before you sign

There is no cooling-off period on business energy contracts, and Ofgem's microbusiness guidance makes clear that a deal agreed over the phone can bind you. So the checking has to happen before you say yes. Use this checklist on any quote, renewal offer or contract, whether it comes from a supplier or a broker.

Start with the Principal Terms

Suppliers and brokers must bring the Principal Terms to your attention before you agree and confirm them in writing afterwards. Think of them as the contract's front page. They set out the key commitments, including price, term, termination charges and any broker fee. If you are on the phone, they must be explained, not just pointed to. Ask for them in writing and read them before agreeing.

The checklist

1. Price: what exactly is fixed?

Find the unit rate (pence per kWh) and standing charge (pence per day), and whether they are fixed for the full term. Check whether any rates differ by time of day. Ask what is included and what is added on top, such as VAT and the Climate Change Levy.

2. Pass-through and change-in-law clauses

A pass-through clause lets the supplier pass changes in certain costs (typically network, policy or metering charges) on to you during the term. A change in law clause lets the supplier alter your price if legislation or a regulatory rule changes its costs. Neither is unusual, but they mean "fixed" may not be fully fixed. Ask which costs can change, how you will be told, and whether the clause lets the supplier pass on costs both up and down. See pass-through vs fixed charges.

3. Term, start date and end date

Check the length, the exact start date and the end date. If the contract can run beyond that, find out how.

4. Termination and exit fees

Ask how an early termination fee is calculated and when it applies, for example if you move, close or sell. Termination fees are common in fixed-term deals. See exiting a contract early.

5. Renewal and rollover

Find what happens at the end. Does the contract roll over, become evergreen or drop to out-of-contract rates? For microbusinesses a rollover can only be for 12 months or less, and the supplier must have sent renewal information. See rollover contracts.

6. Broker cost

If a broker is involved and is paid through your bills, the total cost should be in the Principal Terms as a pounds-and-pence figure for the whole term. Ask for it. Ofgem notes that if you pay the broker directly, the fee does not appear there, so ask about that too. See what your broker is paid.

7. Estimated usage and consumption limits

Quotes use an estimated annual use. Check the figure is realistic. Broker commission is calculated on estimates, so an inflated figure raises their payout. Look for clauses that charge you if your usage falls outside a band. See estimated bills.

8. Payment terms and security

Note payment method, due dates, late payment charges and any deposit or guarantee the supplier can ask for.

9. Meters, smart and half-hourly terms

Check who provides and maintains the meter, and whether the contract allows meter changes. Government plans say that from 1 September 2027 new fixed-term non-domestic contracts must include a smart or advanced meter term. See business smart meters.

10. Cancellation and cooling-off

There is no cooling-off period on business energy contracts. If a seller tells you that you can still cancel after agreeing, ask for that promise in writing before you say yes, and do not assume it exists otherwise.

11. Dispute and complaints process

Check how to complain. Microbusiness and small business customers can take unresolved cases to the Energy Ombudsman. See complaints and the Ombudsman.

Are verbal contracts really binding?

Ofgem's guidance says there is no cooling-off period once you agree a business contract, including when you agree it by phone. Practical steps:

• Do not say "yes" or "go ahead" until you have the written terms.
• If you are unsure, say you will call back after reading the paperwork.
• Note the date, time and name of the caller. If you do end up in a dispute, see phone agreements.

Worked example: reading a termination fee

A contract has six months left. Your estimated use is 24,000 kWh a year and the contract says the fee is the supplier's "reasonable loss". You ask how that is calculated, and the supplier says it is the difference between your rate and its current market rate for the remaining volume.

• Remaining volume: 24,000 x 6/12 = 12,000 kWh.
• Rate gap (illustrative): 28.0p - 24.0p = 4.0p.
• Fee estimate: 12,000 x £0.04 = £480.

Whether a fee like that is acceptable is a matter for your contract, so get the formula in writing before deciding whether a switch is worth it.

Red flags

• Pressure to decide "today" because a price expires.
• No written terms available before agreement.
• "Free" broker service with no cost shown.
• Letters of authority signed without clear purpose.
• Refusal to say which dispute scheme a broker is in.

Three questions to ask about every unfamiliar clause

1. Who decides? If a clause says the supplier can change something "at its discretion", ask what limits apply and how much notice you get.
2. Which direction? A clause that lets costs rise but not fall is worth questioning.
3. What does it cost to say no? Find out whether you can leave if a change is made, and whether termination charges apply.

Keep a record

Save the signed contract, the Principal Terms, the quote and any emails from the seller in one folder. If you later complain to the supplier or the Energy Ombudsman, the paperwork that shows what you were told is your best evidence. Photograph or note meter readings on the day your supply starts as well.

Next steps

• Ask for the Principal Terms, and compare them side by side.
• Run your numbers in the cost calculator.
• Read Ofgem rules for business energy for what the rules require.