Decoding Energy Contract Terms and Conditions

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Signing a contract for your energy is the same as making any long-term decision: it is a good idea to know what you are agreeing to before you sign up.In this article we take a look at common terms and conditions that you will find in a typical energy (electricity or gas) contract in Alberta, to help you better understand common features of an energy contract.

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Make sure you have read and understand the terms and conditions of your energy contract before you sign it

Reading through and making sure that you understand the terms and conditions of your energy contract may not be particularly interesting, but it is a necessary task before signing a contract for your energy supply. While many terms and conditions are fairly similar amongst retailers, it is extremely important that you read through and are aware of the specific details of the energy contract that you are interested in before you sign it.

Background: Regulated Rate vs. Energy Contract

Customers who do not choose to enter in to a contract with a retailer purchase their energy at the regulated rate from a regulated rate provider. These companies, which are often - though not always - also the local distribution company, have the exclusive right to sell regulated rate option electricity or regulated gas rates within their service territory. Their rates, terms & conditions, and processes for procuring energy supply are regulated by the Alberta Utilities Commission (AUC). 

Since 2001, Albertans have the option of purchasing their energy supply from a competitive energy retailer. The regulated rate is the default purchasing option for those who do not choose to buy energy from a competitive retailer. Regulated energy rates are variable and based on market prices, though they include AUC-approved margins for risk and to recover the costs of providing service. Competitive retailers operate with different overhead costs, and provide a wider variety of energy options, including fixed rate, variable rate, and green energy contracts.

Find out more about why you might want to consider purchasing a contract for your energy

As they do not enter a contract with their regulated rate provider, customers on the default regulated energy rate can switch to a competitive retailer at any time without paying an exit fee. If they end an energy contract and do not purchase a new one, they will be automatically returned to the regulated rate provider's customer base, and will pay regulated rates. In the unlikely event that a competitive energy retailer would fail, its customers would be automatically returned to purchasing energy from their regulated rate provider.

Entering a Contract: Rights & Responsibilities

To enter into a contract is to make a formal and binding agreement to certain rights and responsibilities.

Customer Rights & Responsibilities Energy Retailer Rights & Responsibilities
When you enter into an energy contract:
  • You agree to pay for the electricity or natural gas that is supplied to you,
    based on the agreed upon price, plus all applicable charges (administration fees, etc) in a timely manner
    (or otherwise will face late payment charges)
  • You allow the energy retailer to check your credit history, or otherwise agree
    to paying a security deposit (if allowed by the energy retailer)
When you enter into an energy contract, your energy retailer:
  • Agrees to sell you electricity or natural gas at the agreed upon price, plus all applicable charges (administration fees, etc)
  • Promises to respect your privacy and to follow all applicable legislation
  • Agrees to provide you with a monthly bill that outlines your energy usage and applicable charges
  • May automatically renew your contract for up to 12 months at the energy retailer's longest term fixed rate offering then available
  • May charge you a late payment or early exit fee if applicable

Common Contract Terms and Conditions

Here we break down common features of a typical energy contract's terms and conditions

Contract Duration

There are two basic types of contracts that energy retailers can offer: contracts for a fixed period of time, or contracts that can be cancelled without penalty with one month's notice. The maximum length that energy retailers can sell for a fixed period contract is five (5) years, with the possibility of a one year (12 month) automatic renewal (see below). Contracts that can be cancelled without penalty on one month's notice do not have this limit.

Automatic Renewal

Energy retailers are allowed to offer a one-time, maximum 12 month automatic renewal on contracts. If they include the possibility for automatic renewal in their terms and conditions, they must send you (the customer) a renewal notice at least 30 days but no more than six (6) months before the expiry date of the original contract. If you agree to the renewal you will have 10 days to cancel, or can cancel without penalty within 30 days of receiving the first bill on your renewed contract. Your contract will be automatically renewed if you do not expressly accept or reject the renewal.

Contract Price

When you sign a contract for your energy supply, you and your energy retailer agree on the price at which you will purchase energy from them. That being said, some energy retailers do reserve the right to change fixed rate prices or the transaction fee (that is charged with a variable rate).

Credit Requirements & Security Deposits

Both competitive energy retailers and regulated rate providers require new customers to undergo a credit check before starting service. Like regulated rate providers, competitive energy retailers may charge you a security deposit if they decide that your creditworthiness is insufficient. However, unlike regulated rate providers, competitive retailers are not obliged to sell you energy if you do not meet their credit requirements. Competitive retailers may, but are not obliged to, pay interest on the security deposit that they charge. If there is a serious problem with payment, they may use the security deposit to recover late payment charges and associated costs, and may end your contract (in which case you would be returned to paying your local regulated rate provider). 

Some competitive retailers (notably those belonging to the Utility Network) offer reduced rates if you open a security deposit account. In this case, you will agree to deposit and maintain a minimum (usually $200) security deposit, which will be held for the duration of your contract. In return, you have the option of paying a reduced rate for your energy (if offered by the competitive energy retailer), and receive a certain percentage (usually 5%) interest, which is typically credited from your account after the second billing cycle.

Starting Service Obligations

Your competitive retailer will outline the maximum delay for the start date of your contract. Depending on the retailer, the start date of your contract may be up to 90 days after the retailer has received a signed copy of your contract. You may cancel your contract without penalty if your energy retailer does not start providing services within 30 days of the start date. 

In the meantime, your energy supply will not be compromised! Even if you experience a delay in the commencement of your contract, your regulated rate provider will continue to sell you energy, and your bills will come from them until your contract starts.

Providing Notice

Your energy contract will specify the minimum notice period required to make changes to your contract (such as if you move, change your banking details, or wish to cancel the agreement). The time period required for providing notice does vary by retailer, so it is a good idea to check how many days notice your retailer requires.

Billing & Payment

When you enter into a contract with an energy retailer, they agree to bill you regularly for your consumption, and you agree to pay your bill in full by the payment date as indicated by your bill. Your energy contract will outline what sorts of charges you will be responsible for, and in most cases will provide for the possibility of retailers to include adjustments related to your energy charges.

Most contracts will state that it is your responsibility to pay monthly bills, even if you do not receive the bill (which means that it is important that your billing information is accurate, and that you are aware of when your bill is usually due). They will also likely require you to pay your bill in full while in any dispute over a bill, or otherwise you may be charged late payment fees.

Moving a Contract

You will have to notify your energy retailer  if you move during the duration of your contract. Your energy contract will state what will happen if you move and the minimum notice required. Usually your contract will continue at your new address, if it is within an area that the energy retailer serves. If you are moving out of province or not in an area served by your energy retailer, in most cases your contract will end on your move date at no liability to you or the retailer. Make sure that you check the precise terms of your contract, as they may be different.

Cancelling a Contract

Your contract will specify the terms under which you can cancel your contract, and with what kind of penalties. Many competitive retailers do not charge cancellation fees when you provide enough notice, so it is a good idea to check out whether this is the case for the contract you are interested in.

Alberta energy marketing legislation allows customers to cancel energy contracts at no cost under the following conditions:

  • You cancel within 10 days of having signed your contract (during the cooling-off period)
  • If the contract did not identify a specific date upon which the supply of energy or services would begin,
  • If the marketer was not licensed at the time the marketing contact was entered into
  • If you do not receive service within 30 days following the start date (remember, the start date is not the same as the date upon which you signed the contract)

Retailer-Initiated Changes or Contract Termination

In most energy contracts the retailer reserves the right to make amendments to the terms of the contract, with notice (they should specify the minimum time period in which they will provide notice - 30 days, for example). Retailers also often reserve the right to cancel the contract, if you do not pay your bills or consume energy beyond a certain threshold.

Limitations on Responsibility

All energy contracts include a section on limitations on responsibility. As retailers do not control the energy distribution systems that ensure energy supply to your home, they cannot control whether or how you receive energy, nor do they have control over the quality, pressure, voltage, frequency or continuity of energy supply (you should raise these issues with your distribution company). 

Privacy

Your energy contract will specify how and under what conditions your personal information will be used and shared. Some energy retailers may reserve the right to share your personal information with subsidiary or affiliate companies. If you are concerned about privacy, you should also make sure to read the retailer's privacy policy, if they have one.

Learn more about signing a contract in Alberta