We have published a guide on the 10 rules you should follow when appointing an energy consultant. In this supplemental guide we are adding seven suggestions you should consider when you are asked to sign a contract with an energy supplier to ensure you have an energy supply that is fairly priced and doesn’t come with unpleasant surprises.

If you don’t understand the contract that you are being asked to sign then keep asking questions until you are happy. A professional consultant or energy supplier will be pleased to spend time with you until everything is clear.

1.  Check the basics before you sign a contract

You are the best-placed to know what you need in a contract. Are the start and end dates on the contract correct? Company name? Any meters missing? Any meters that shouldn’t be there. Payment terms? “Green”? What volume of electricity or gas are you committing to buy? Do you have any outstanding debt or disputes with your current energy supplier(s) that could prevent you transferring to a new supplier?

2.  Do not sign a contract that you don’t understand

Electricity and gas contracts are long and off-putting documents. Fixed price contracts usually have two parts: the document you sign with your prices etc. and the standard terms and conditions. Flexible price contracts have an extra document that explains exactly how you buy the wholesale energy.

Rogue brokers do mis-sell contracts and some customers sign contracts without giving them enough attention; some high-risk contracts to watch out for are:

1 “pass-through”

Check: are there any other costs excluded from the prices in the contract?

You need to look carefully at the contact you are being asked to sign and see what is included in the price and what isn’t. If you are opting for a fixed contract then you should expect all costs to be fixed other than Climate Change Levy and VAT. Ensure your energy supplier confirms this in writing.

2 “flexible” or “multi-purchase”

Large customers spending millions per year have been signing flexible contracts, working with specialist consultants and buying energy in the wholesale market for circa twenty years. Medium-sized customers can also buy in the wholesale market but it’s important the customer understands how the contract works and how they are managing their risk if wholesale prices rise.

Most flexible contracts have pass-through costs so few if any of the charges are fixed from the outset.

Check: If you are a customer with spend less than £1.5m per annum in either gas or electricity then you should query whether this is the right contract for you.

3 “baskets” or “frameworks”:

Baskets and frameworks often have the complexity of a flexible contract but the mechanics are different and you give up control to the organiser of the basket. You need to really understand the rules and mechanics of the basket. Specifically, how will a basket or framework benefit you versus buying directly? How did the broker pick the basket’s energy supplier (some brokers don’t run a competitive tender)? Thirdly, how can the broker show that the prices you will pay the supplier are competitive? Often members of public sector baskets and frameworks complain there is little clarity about their energy prices.

3.  Check the commission

Since 1 October 2024 suppliers have been obliged to clearly state the amount of any commission that is contained in their contract prices. You should be able to spot the commission next to the unit rates or in a separate table. Some suppliers, such as EDF Energy, have created a separate one page commission document and brokers should send that page to you alongside the supply contract.

Check: use the Noveus Energy guide to commission transparency to confirm whether commission is being charged and at what level.

4.  Pick the right energy supplier

You want your energy supplier to do the basics like registering your meters, reading them, providing correct energy bills in the right format and tracking your payments. You want the supplier to answer your queries promptly and help you with your business changes such as new sites.

An energy consultant that deals every day with different suppliers should steer you away from suppliers whose service is poor.  If the consultant is checking your energy bills for you then they’ll be really keen to make sure that the energy supplier is competent.

Unfortunately, there’s no guarantee that once you sign with a “good” supplier that they’ll stay on top of your account. The biggest disruption occurs when a supplier merges and/or changes their billing system. Another risk that’s difficult to predict is financial failure of a supplier. Most recently, we’ve seen domestic suppliers like Bulb fail and some of the smaller B2B suppliers like CNG as well. Behind closed doors, some smaller business suppliers also told their customers to absorb higher prices or have to deal with their supplier going bust. 

5.  Think green

Many customers buy “green” electricity and pay an additional premium for it.  Electricity suppliers also like to promote their “green” credentials: some have “green” heritage, some only supply “green” electricity, they talk about “deep green,” “pure green,” etc. We talk in more details about your green choices in our blog. At each contract negotiation, you must decide how “green” you want your contract to be and consider how much extra that might cost you.

6.  The secret of great contracts is timing

It’s human nature: most customers leave signing an energy until the last minute, i.e. just as their current contract comes to an end. Timing and contract duration are two things to think carefully about.

Your energy broker may approach you a long time before your current contract expires and suggest you renew early. This may be a sincere approach by the broker when energy market prices are favourable.  Or it may be a cynical approach because the broker is keen to lock-in your business and earn more commission. 

The most common contracts are one, two or three years durations and that’s because wholesale prices are only generally available for the next three years.

Some energy brokers routinely promote five year contracts. Clearly a five year contract means five years’ commission for the broker; it’s especially lucrative if the commission is high and not disclosed. With the benefit of hindsight, a five year contract when prices are low is a great thing. A five year contract when prices are high is not. We are currently investigating a contract that was signed when prices were high, started three years after the signature date and lasted for a further two years. It was also a complex contract (see point 2 above) and overall this looks like a prime example of an energy broker mis-selling and the customer signing something they really shouldn’t have. The likely cost to the customer is six figures per annum.

7.  Read the small print

If you want to sign up to a flexible contract then you should use a specialist consultant to review the contract for you unless you are experienced in these sorts of contracts yourself.  There are a number of traps: some contracts are better than others, suppliers write contracts which are ambiguous and contain errors, suppliers’ contracts are silent in key areas and don’t protect customers and some suppliers  add extra costs that aren’t obvious from their contract wording. If you just want a fixed price contract then you need to know if the contract price is really fixed, i.e. when can the price be varied?  And also what happens if I consume more or less than predicted?  An experienced energy consultant will be able to guide you: which suppliers’ standard terms and conditions are better?  Who has volume penalties?  Are there any unusual and unfair clauses.

In summary, the questions you should ask yourself, your energy consultant and/or your energy supplier are:

• How do I know the price is competitive?
• Do I understand the product?
• What’s the price and is the price really fixed?  When can the price be varied?
• What extras can the supplier add to the bill?
• What volume am I committing to and what happens if I consume more or less than predicted?
• Am I paying the right amount of commission?
• How green is my energy supply?
• Why should I sign today?  Is the contract duration appropriate?
• Will I get correct energy bills, based on correct meter readings in the right format?
• Am I confident the supplier will look after me for the life of my contract?

Noveus Energy are a boutique consultancy only working for a limited number of clients thereby ensuring consistent high-quality delivery. We are 100% committed to fee transparency. We see ourselves as part of your team providing strategic energy advice, support and delivery and leaving you free to run your business. Our reward comes from professional satisfaction and an exceptional high client retention rate.

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