Do you feel like you are stuck in a contract with your electricity provider? What should you do if you are in a contract and electric rates go down? What if you find another electricity plan from another provider that’s better? And what if you are moving?
The big question is, “Can I cancel my electricity contract?” The answers depend on your specific situation. Each electric supplier has a unique policy for early termination fees and each state has their own rules about what your supplier can charge in different situations.
The bottom line is that you can still shop for electricity rates and plans even if you are in a long-term contract.
However, if you switch before the end of the initial term of your contract you will likely have to pay an early termination fee. Depending on your situation and your contract, that may be a decision worth crunching the numbers over. We’ll show you how to do that below.
Scenario #1: “I Found a Better Electricity Rate But I’m in a Contract”
Electricity rates fluctuate regularly. In most of the U.S., electric rates are highest in the summer and lowest in late winter/early spring. Because summer is a popular time to move, people often find themselves shopping for electricity during the time of year when rates are the highest. When it comes time to renew their contract, they are stuck in a cycle of renewing when rates are the highest.
It’s no surprise that these customers are frustrated when they notice lower rates available during other times of the year.
If you find yourself in this situation, take a look at your contract or call your provider. Providers are required to disclose the early termination fee which can range from $0 – $275 or more. Some providers will waive the fee if you simply call them directly. Other providers may only charge a fee per month remaining in the contract. Know what the termination fee is for your contract and then you’ll be able to make an economic decision.
So if you are in this scenario, the big question is….
Should I pay an Early Termination Fee and Get Out of My Contract?
Here’s how to decide if you should pay an early termination fee and get out of your contract. You’ll need to spend a few minutes doing some basic rate comparisons.
Time needed: 7 minutes.
How to decide if you should pay an early termination fee to get our of your electricity contract.
- Understand your current price for electricity.
Grab your most recent electric bill. Take the total amount due and divide by the amount of energy you used (kWh) during this billing cycle to calculate your average rate per kWh.
Luckily, by law, your Texas Electricity Bill will have a section that highlights the average price you paid for electricity service.
- Shop for a better electricity rate.
Use ElectricityPlans.com to easily find a better rate for the same energy usage. Use the Calculate Your Bill feature to check what rate you would be paying for that same amount of electricity
- Compare your current rate vs. what you could be paying
Calculate your possible savings per month, based on your current rate versus what you could be paying.
- Calculate pay-back period on the early termination fee
Divide the early termination fee by the amount you will be saving per month. The result is the number of months of savings it would take for you to make your money back on the early termination fee
- Decide if the savings is worth
Only you can decide if it’s worth it to you. If your savings on your monthly bill will pay you back on the early termination fee within 4-5 months, go ahead and switch. Just remember, the early termination fee will be due when you switch away from your provider. And your savings from switching will come in over time.
Shop Now for a Lower Rate, and Compare Plans
Scenario #2: “I’m Moving But I’m in a Contract”
You’re moving and you’re in a long-term contract with your electricity provider. Fortunately, you are protected.
If you are moving, you will not have to pay an early termination fee for your electricity contract.
Your provider may require proof of your change of address in order to waive the cancellation fee. Usually, just providing a forwarding address for your final bill may be enough.
If you are moving within the provider’s service area, you may be able to transfer your existing contract to your new address but you are not required to.
Scenario #3: “I Found a Better Rate the Next Day”
Most deregulated states give you two or three business days to cancel your contract without penalty. For example, in Texas you have three business days to change your mind after you sign up with a provider.
If you find a better rate a day or two later, it’s not a problem. The number of days that you have to change your mind is outlined in the terms of service included with your new electricity contract.
Several major providers, including Gexa Energy and TXU Energy, have a satisfaction guarantee. If you sign up for one of their plans and change your mind within the first 60 days, you can change to any one of their plans with no ETF (conditions apply…of course).
How Does Average Billing Impact my Ability to Switch Providers?
Another consideration is average billing. If you signed up for average billing with your provider, you will be required to settle up any deferred balance on your contract if you terminate it.
To learn more about average billing, check out How Does Average Billing Work?
Should I Stay Or Should I Go?
It’s not a good feeling to be stuck in an unfavorable contract with your electricity provider.
Know that you have options and you don’t have to wait until the end of your contract term to make a change.
After evaluating your specific contract, you may come to the conclusion that paying an early termination fee makes good economic sense because it saves you money in the long run. ElectricityPlans.com helps you compare electricity rates and find the best plan for you.