If you recently signed up for a retail energy contract and you want to cancel, you might be in luck! Some states allow for contract rescission periods that allow consumers to terminate their agreements without having to pay early termination fees or contract exit fees. This article outlines the details about energy contract rescission contract language, so you have the knowledge to make a decision about canceling your contract. If you are uncertain about what to do, it might be prudent to hire an energy broker or consultant to help guide you through your options.

What Is The Rescission Period?

You might be wondering if you can cancel your energy contract before it starts. The simple answer is ‘it depends’. There are several factors that determine whether a rescission period is applicable, the length of the period, and the process by which you can cancel the contract early. Here is what to consider:

Commercial Customers vs. Residential Customers

In most deregulated energy states, Public Utility Commissions or regulatory bodies consider residential customers to be in a protected class. Due to this perspective, most residential energy contracts have rescission periods that allow the customer to cancel early. These periods can be anywhere from three days to seven days, and permit the residential consumer to terminate their energy plan without any fees or obligations. Note that many residential contracts do not contain early termination fees, and in these cases, a rescission may happen at any time with no consequences.

Commercial customers, on the other hand, are often treated differently. Most commercial contracts do not allow any sort of rescission and those that do have very short windows that allow the contract to be terminated.

Contract Start Date

Most customers that sign up for an energy agreement with a future start date think that they should be able to cancel the contract as long as it has not started. That is not the case. Because energy suppliers offering fixed rates have to pre-purchase energy on behalf of the customer in order to guarantee the fixed price, future-dated energy contracts cannot be canceled, unless terminated within the allotted rescission period.

How Does Rescission Work?

When you sign up for a fixed-rate energy supply contract, it usually has a start date, end date, and term (in months). So, let’s say you signed up for a contract on 3/1/2023. The contract begins on 4/1/2023 and is fixed for 12 months. The contract period would then end on 3/31/2024. If the contract allows for a three-day rescission period, then you would have the right to cancel the contract three days from when you signed on 3/1/2023. After that, the contract is valid. If you attempt to leave the contract before it expires, then you will be subject to exit fees and early termination penalties as spelled out in the agreement.

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Early Termination Penalties

The steepest penalties you face for terminating your energy contract too early are early termination fees. And, if you are a commercial customer these fees can be quite expensive. In fact, most commercial contracts require customers to pay for the remaining energy left on the agreement if they try to exit early. This can equate to tens of thousands, if not hundreds of thousands of dollars. Most residential contracts that have cancelation fees are simple fixed amounts (e.g. $100 to cancel or $500 to cancel or $10/mo remaining on the contract to cancel).

Tips For Avoiding Energy Contract Problems

The last thing you want when you sign up with a third-party provider is to have an issue with an energy supplier. This can be costly for your home or business, so it’s best to follow these tips to avoid energy supplier problems:

  • Read The Contract Terms: Taking the time to read the contract terms, specifically related to early termination and rescission period, will help you to understand what you are agreeing to.
  • Know Your Renewal Date: Understanding the exact term of your energy contract renewal and when it expires is key to not exiting too early and getting charged an early termination fee (ETF).

Need Help Rescinding A Contract?

If you signed an energy contract but want to cancel, we might be able to help you. Depending on the terms of your contract, your customer type, and the energy supplier with whom you contracted, there could be hope to rescind your agreement. Diversegy works with the nation’s leading energy providers and helps our commercial customers find low-cost energy supply. Contact us today for a free consultation.

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