This is why you pay more when your energy contract renews

What is an automatic contract renewal? It may be the reason your bill goes up! Find out how to avoid it.

Did you know? The energy rate chosen by many consumers may increase drastically after a period of time, discretely…and legitimately. You may have been on the receiving end of this yourself without noticing. This frequent phenomenon is due to the automatic tacit renewal of a gas or electricity contract. However, you can easily prevent it in advance or, failing that, cancel your contract. To assist you, the team at Energyprice.be will scrutinize this process. So read on to find out how to avoid an unexpected increase in your bill!

Choosing an energy contract: keep an eye out for special offers and when they expire

First of all, let’s set the context.

As a consumer, when you choose a new gas or electricity contract, there are a number of criteria to take into account. These include the price, the type of tariff (fixed or variable price), the contract duration, the payment options, the quality of the customer service from the supplier, etc. Of these criteria, there is one that, logically, is slightly more important than the others: the rate per kilowatt-hour.

All households will try to take out the cheapest energy contract depending on their consumption profile, and that’s quite natural. The suppliers, of course, are well aware of this, which is why most of them offer introductory promotions.

So, if you become a new customer of Lampiris, Mega, or Engie, for example, the chances are you will be able to enjoy some extremely attractive preferential rates. These are great bargains, admittedly, but they are only temporary. These promotions are only valid for one year, or, in certain cases, until the end of the contract. In other words, at the end of this period, your supplier will renew your contract in accordance with the current terms, without the promotions. So it’s very likely that the new rate will be slightly higher.

Automatic renewal … without the promotions

Although, in itself, this rate upgrade is legitimate, the suppliers could be criticized for not communicating clearly with consumers. For although customers understand that they are receiving introductory offers, many of them do not really know what will happen when the promotion ends.

There are two possible scenarios, although their consequences are actually quite similar.

1. The contract and the promotion both last for one year

If, at the end of the contract, the household does not take out a new contract, there will be an automatic tacit renewal of the original contract. The household will then be placed on the supplier’s “normal” rate, without the promotion and without changing the product’s other characteristics. Note that the initial tariff may have changed between the signing of the contract and its renewal.

For example, if, in January 2020, you took out an Easy Fix electricity contract from Engie (one-year duration, single-rate meter), your tariff was c€8.160/kWh. But if you had the promotion, you only had to pay c€5.712/kWh. At the end of the contract and the promotion, the new rate in the event of renewal was the rate in force in January 2021, in other words, c€8.760/kWh.

Please note that this is a deliberately simplified example. The rate applied would actually have been the rate for November or December 2020, not for January 2021. The supplier normally has to notify you at least one month in advance of the renewal.

2. The contract period is longer than the promotion period

This is the case, for example, if you have taken out a two- or three-year contract but the promotion given to you only lasts for one year. This is then referred to as a price correction rather than a contract “renewal”.

When the promotion ends, you will be billed according to the terms initially applied to this type of product, until the end of your contract. Your contract may then be renewed if you do not take steps to change it.

A regrettable lack of communication?

Despite the significance of this rate change (up to 30% more!), many customers do not realize what is happening. Is this down to a lack of communication on the part of the suppliers? Those who signed the governmental agreement on consumer protection are, however, obliged to give their customers explicit warning of the imminent renewal of their contract at least one month in advance.

In fact, this agreement still contains a number of weaknesses:

• There is no obligation for suppliers to support it. Some, such as Mega, have never signed it. They can therefore decide not to warn you about the tacit renewal of your contract.
• The means of communication are not laid down clearly in the agreement. It is simply a matter of informing the customer “in writing or on a durable medium”. So, if for some reason your letter went astray, you might not receive the information.
• Your consent to the renewal is not necessary, as long as the supplier offers you the same product (or equivalent) at the cheapest rate (without promotion).
• The supplier is not required to specify that the updated rate is higher than the rate you currently receive. However, they must clearly mention that you can compare your prices on the regional regulators’ website.

All of this means that your contract could be renewed, or its price adjusted, without you knowing. However, you can always find out by accessing your customer space since the rate card for your contract will always be available there. If you do not have access to this space, you can always request the information from your supplier.

Please note that, apart from the price, the other characteristics of your renewed contract must remain identical.

Belgian suppliers in the regulator’s sight

Federal regulator CREG singles out this practice and that of dormant contracts for their lack of transparency. Very often, the customer will not realize that their electricity bill is increasing because their promotion has ended. Instead, they tend to think that this new renewal rate is in line with natural price inflation. Other less observant customers may not even notice the tacit renewal of their contract or the price increase.

In response, the government has asked certain suppliers, such as Luminus, Eneco, Mega, and Lampiris, to present an action plan on contract renewals leading to dormant products. As a reminder, these relate to particular instances of contract renewal involving a product that is no longer actively offered by the supplier.

Over time, the CREG wants to put an end to this type of product and encourage consumers to compare their contracts more regularly. However, the discussions seem to be focusing solely on the very specific case of dormant contracts and not renewals after promotions. But the energy suppliers would do well to improve their communication with customers on this point as well.

How do you cancel an automatically renewed energy contract?

The good news for consumers is that they can cancel their energy contract at any time, without notice, and without a cancellation fee (however, please pay attention to promotion terms that may influence the way the fee is calculated). If, for example, you take out a three-year electricity contract, you are not required to wait until the end of that period to change your price plan.

In summary, to stop a contract renewal, you simply need to take out another contract. That’s it. The associated administrative steps have been simplified greatly in recent years. So, if you decide to change supplier, no cancellation letter will be required. You will simply need to confirm your contract with your new supplier. They are then responsible for advising your previous supplier and carrying out the necessary cancellation steps instead of you. Your only involvement will be to provide your meter readings when your contract ends with your old supplier and begins with your new one.

>> Read also: How can you cancel an energy contract easily?

What if you want to keep the same supplier? You can then choose whether to accept the new rates or opt for a different product offered by the supplier in question. Note, however, that since you are still a customer you will no longer meet the conditions for receiving an introductory offer. This means the original standard tariff will apply from the start.

Conclusion: compare your prices before your contract ends!

In all cases, it is worth comparing your prices when your promotional period is coming to an end. Ideally, you should do this one month in advance. By default, you should rely on your own proactivity rather than communication from your supplier.

This is what you need to do:

1. Did your contract come with a special promotion when you took it out? If so, check how long the promotion is valid and what prices are charged excluding the promotion. To do this, you can go to your online customer space or request the information from your supplier.

2. Compare your renewal rate with the offers on the market. To do this, use a price comparison site approved by the regulator, such as Energyprice.be.

• If your promotion no longer applies, you are strongly recommended to do a comparison at once.
• If your promotion is still active, you do not need to compare your prices immediately. You can wait until one month before the end of the promotion.

3. Depending on the results you obtain, follow one of the steps below:

• Is your rate still better than the others? Great! You don’t have to do anything for the moment; compare your rates again in 6 to 12 months’ time.
• Have you found a cheaper contract, possibly with a new promotion? Sign up online at once via our certified comparison site.

4. You will then receive confirmation from your new supplier. They will be responsible for canceling your previous contract before it is automatically renewed. You will be sent a meter-reading request within the following few days in order to finalize the operation.

5. Pay attention to the terms of the promotion and make a note in your diary to do a new comparison one month before it ends (typically after one year).

Do you still have questions about contract renewals and the rates applied? Please contact us free of charge on 0800 37 456. An adviser from Energyprice.be will be delighted to clarify the situation for you!

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