Early Contract Terminations
By Michael S. Payne, J.D., L.L.M, Executive Vice President and Corporate Counsel
The APPI Energy Customer Service team has resolved an increasing number of issues involving electricity supply contract terminations. Early termination occurs for a variety of reasons, most often because a customer authorizes an electricity supplier contract with a start date that overlaps with an existing supply contract.
Most electricity suppliers charge Early Termination Fees (ETFs) to customers that terminate contracts before expiration. If customers request to reenroll dropped accounts, many suppliers charge “gap in service” penalties. The APPI Energy Customer Service team has noticed that suppliers are less likely to reenroll accounts that are terminated within a three-month timeframe before contract expiration dates.
Each supplier contract is different in how ETFs are calculated. Some suppliers assess specific dollar amounts per meter. Other suppliers calculate ETFs based on each contract’s remaining term and electricity usage profile, or electricity market prices at the time of early termination. Survey reports by the Energy Research Council show that seven out of every 10 small-to-medium business owners are unaware or do not believe that their electricity supply contract has an early termination provision.
Customers that engage with solicitors risk exposure to early termination without their consent. Adding to the problem of early terminations is the notable increase of assertive energy salespeople targeting customers through mailings, phone calls, and door-to-door soliciting. “Slamming” occurs when a misleading salesperson obtains a customer’s electricity account number, and then switches the account to a different supplier without the customer’s knowledge or consent. This effectively terminates the customer’s existing supplier contract. Businesses like multi-location franchises and healthcare entities are particularly vulnerable to slamming. Moreover, businesses that experience staff turnover or changes in managerial structure have a higher risk of early contract termination.
Some energy salespeople are unlicensed, inexperienced, or simply unscrupulous. Not only do these unethical solicitors dupe customers, but also they often violate “do not call” lists and marketing regulations set forth by state public utility commissions (PUCs). Awareness and education are your best defense against the unnecessary costs and hassles associated with ETFs.
To prevent early electricity supply contract termination from happening:
- Make your employees aware that misleading callers and visitors are active. Even employees that are not authorized to discuss your utility bills or make contract decisions can be hounded by callers and tricked into providing confidential information.
- Protect your energy bills, account numbers, and related information as you would treat any confidential business information. Your electricity account number is often the only requirement for an unauthorized supplier switch.
- Beware of an energy salesperson that walks into your business and claims to represent the electric utility. Anyone who works for the electric utility already has digital access to all of your account information.
- Beware of promotional offers that require your signature or verbal commitment.
- Advise your employees to block salespeople from engaging with other employees.
- Ask callers if they are properly licensed with the PUC.
- Request to be removed from call lists.
- Review your electricity bill each month for unauthorized charges or changes. Make sure the correct supplier is listed on your utility bill.
Customer Story: Automobile Dealership Owner, Pittsburgh, Pennsylvania
“Like so many business owners in Pennsylvania, I’m bombarded with phone calls from energy salespeople. Recently, I told one particular caller that I was locked into a supplier contract. The caller assured me that he wouldn’t jeopardize my current contract, but he promised me an additional 10% discount on my current locked-in fixed price. I reluctantly agreed. Soon afterward, APPI Energy alerted me that my supplier dropped my account and would charge me early termination fees. I attempted to contact the salesperson that misled me, and he was unreachable. Fortunately, APPI Energy’s customer service team worked with my supplier to reenroll my account without termination fees or ‘gap in service’ penalties. I’m grateful that APPI Energy serves as an advocate on my behalf, and its customer service team is always here to help.”
APPI Energy has vetted and approved 54 supplier companies, and analyzed more than 100 different supply contracts. We deliver data-driven solutions, and true apples-to-apples comparisons. Our proprietary platform gives clients a competitive edge as they make informed, customized purchasing decisions. Contact us at 800-520-6685. Resources available on request.