Skip to main content

What is an electric early termination fee and why do they exist? Early termination fees are becoming serious problems for many electricity customers across the state of Texas, as many electricity providers charge these fees. It’s important to get a good idea of what these fees are, why they are charged, and how you might be able to avoid them, so you don’t have to pay any early termination fees.

What Are Early Termination Fees?

Early termination penalties, which typically include some rather hefty financial penalties, occur when the current supplier contract includes an ETF clause. You will find that most supplier contracts today have certain clauses that are meant to protect the electricity provider.

In Texas, you have the benefit of being able to pick and choose from among the various suppliers for electricity. However, many people often sign contracts with the electricity provider. What happens if they aren’t happy about being in the contract with that supplier, though?

Sometimes, supplier companies use questionable sales techniques to get people to sign up. They might appear to have competitive pricing at first, which helps them to bring in more electricity customers. However, the energy salespeople might not talk about how the price of electricity will go up after a couple of months, or that when signing up, the customer locks themselves into an auto renewal clause and will be charged substantial penalties for early termination.

Other times, customer requests, phone calls, and questions go unanswered by the energy salespeople. You might also have dealt with a misleading salesperson who was not entirely open about the contract’s expiration date. There could be a host of reasons that you might feel as though you are stuck with the supplier contracts you signed.

However, if the current electricity supply contract you have signed isn’t working, electricity customers can always opt to find another solution. This is one of the benefits of being in Texas. You can find a range of companies offering supplier contracts, and it should be possible to find something that will work better for you. You can and should look around to find a company that can offer a supplier contract that will work better for your needs and your budget.

Why Are There Early Termination Fees?

Even though you can get out of your current electricity supply contract, you will find that there will generally be early termination fee penalties. The state allows these companies to charge for early contract termination. The termination fee price will vary from one provider to the next, of course, as electricity contracts differ.

The early termination fees are used by an electricity provider to protect themselves when a customer signs a contract with a new energy provider before the current contract ends and there is an overlap.

This is why it’s always a good idea to read and understand your contract fully whenever you are signing up for a new provider. You want to know all of the ins and outs regarding their policies and procedures when it comes to terminating a contract early.

Some of the things you will want to look out for when you are checking out your current contract, along with any other contract that you might end up signing include:

  •         Contract expiration date
  •         Auto-renewal
  •         Month-to-month continuation
  •         Terms of the early termination fee

The more you know about your contract the better. In some cases, it can be difficult to sort through all of the various choices and understand what’s happening with your current contract. If that’s the case, you can always work with an energy procurement decision maker to help you make your choice. They can help you understand the contracts and find the best suppliers with competitive pricing for your needs.

Sometimes, canceling an existing supply contract and incurring fees might not have been your fault, as you will see below. Yet, they will still charge an early termination fee.

What Is Slamming?

One of the other problems that can come up is called slamming. If a misleading salesperson obtains a customer’s account number and then switches the customer’s supplier without letting them know, they are effectively terminating the customer’s existing supplier contract.

Even though they weren’t the ones that initiated the change, those customers are still going to be facing some large penalties because their contract was terminated early.

How is it even possible that these types of salespeople are in business? They shouldn’t be in most cases. A lot of these salespeople might bill themselves as being an energy consultant, but they do not have a license and/or they have no experience. They rely on the fact that people hate paying more for their energy than they should, and they target people using phone calls, door-to-door visits, and using mail marketing.

These salespeople do not care about the marketing regulations set by the state and will often violate do not call lists. These types of supplier companies that utilize questionable sales techniques exist, but they are operating without being fully within the bounds of the law. If and when they are discovered, it could lead to large fines, and in some cases, their businesses could be shut down entirely.

Can You Get Out of an Early Termination Fee?

Sometimes, you can avoid early termination penalties, although this is often easier said than done. If you are an electricity customer in Texas, you can avoid the fees if you switch no earlier than 14 days before the contract expires. However, this can be hard to do, as Texas electricity providers only need to notify you 30 days before your contract expires. This can leave you with a lot less time to find a new company for your electricity than you realize. You need to shop, find a company, and make the switch on time, so you don’t end up with a variable rate.

Should you always look for a new company? You will find that often, the renewal rates at your current electricity supplier will be higher than what you will get if you do opt to switch during that window. It’s always a good idea to at least look at the options available. Again, you should let a knowledgeable energy procurement decision maker help you.