Business Energy Glossary
What is a rollover contract?
A rollover contract is a new fixed-term business energy contract that a supplier creates automatically when the previous contract reaches its end date and the customer has not signed a replacement. The rates are usually well above the prevailing market and the term is typically 12 months. Ofgem’s licence rules (SLC 7A) restrict rollover contracts for micro-businesses but they remain a legal commercial practice for larger business customers.
Rollover contracts are a different beast from deemed and out-of-contract rates. A microbusiness can leave out-of-contract terms without giving notice. A rollover contract is a fresh fixed-term agreement that locks the customer in for the new term, often with exit fees if they try to leave early.
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How rollover contracts work
A rollover contract is a new fixed term a supplier starts automatically when a business doesn’t renew, or doesn’t give any notice its contract requires, before the end date. For microbusinesses, Ofgem’s licence rules limit a rollover to 12 months and allow it to be ended at any time without a termination fee.
A rollover contract is created by the supplier under terms set out in the original contract. The original contract specifies that if the customer does not actively renew or terminate within a defined notice window, the supplier will automatically create a new fixed-term contract on the supplier published rollover rates. The customer is then bound to that new contract for its full term.
Key features of a rollover contract:
- Fixed term. Typically 12 months from the rollover start date.
- Higher rates than the market. Rollover rates are not competitive renewal offers. They are designed to recover risk and operational cost on an unengaged customer.
- Exit terms. Some rollover contracts include early termination fees if the customer tries to leave before the new end date.
- Notice window. The customer can avoid the rollover by terminating or signing a new contract within a specified period before the original end date.
Microbusiness rollover rules (SLC 7A)
In 2014, Ofgem implemented changes to Standard Licence Condition 7A that materially restricted rollover practices for micro-business customers. The reforms targeted contracts that micro-businesses were entering into automatically without active consent, often at non-competitive rates.
Under the 2014 rules, suppliers can no longer:
- Roll a micro-business onto a further term longer than 12 months, or charge a termination fee to leave a rollover.
- Impose new fixed-term contract terms on a micro-business who has not signed.
- Charge termination fees on a micro-business arrangement entered into without active signature.
A deemed contract has no fixed term and ends once a contract is agreed.
Micro-business protections
Ofgem defines a micro-business as one consuming less than 100,000 kWh of electricity per year, or less than 293,000 kWh of gas per year, or with fewer than 10 employees and turnover or balance sheet of no more than £2 million. Most small UK businesses qualify.
For these customers, the practical effect of the 2014 reforms is:
- A supplier can only roll a microbusiness onto a further term of 12 months or less, and the business can give notice to end it at any time without a termination fee.
- The supplier must provide clear renewal communications 60 days before contract end.
- The default rate after contract end is a no-term out-of-contract arrangement, which the customer can exit at any time on 30 days notice.
- Any new fixed-term arrangement requires positive, documented agreement from the customer.
Larger business customers
For business customers above the micro-business threshold, rollover contracts remain legal and are still used by some suppliers. Larger customers are assumed by the regulator to have the resources and capability to manage their own contract renewals.
The terms vary by supplier, but a typical rollover for a larger customer includes:
- A 12-month fixed-term agreement starting from the original contract end date.
- Rollover rates set by the supplier, usually well above the prevailing market.
- A defined termination notice window (depending on the contract) in which the customer can exit without penalty.
- Exit fees that apply if termination is sought after the notice window.
The notice window matters. A customer who notices the rollover within the window can still leave. After the window, they are locked in to the rollover term.
Rollover vs OOC vs deemed
| Arrangement | Triggered by | Term | Exit notice |
|---|---|---|---|
| Deemed | No contract ever in place | Open-ended | Maximum 30 days, no fee |
| Out-of-contract | Fixed contract expired without renewal | Open-ended | Maximum 30 days, no fee |
| Rollover | Supplier auto-renewal at contract end | New fixed term (usually 12 months) | Defined notice window only, exit fee if missed |
The defining feature of rollover is the new fixed term. Deemed and OOC have no term and can be ended at any time. Rollover binds the customer to the new term unless terminated within the defined notice window.
How to avoid being rolled over
Three approaches that prevent rollover entirely:
- Engage with renewal early. Suppliers typically issue renewal communications 60 to 90 days before the contract end. Reading and acting on these communications avoids rollover.
- Maintain a contract register. A simple spreadsheet tracking every meter point, the supplier, the contract end date, and the rollover notice window. Quarterly review catches anything approaching the rollover boundary.
- Issue a Letter of Authority to a broker. A broker on retainer typically manages renewal communications across the portfolio, signs no-rollover instructions where needed, and presents alternative contract options before the rollover window closes.
If a rollover has already taken effect and the notice window has expired, the customer is generally bound to the new term. Early termination during the term may incur exit fees, but it’s worth comparing the exit fee with the cost of staying for the remaining term. The maths is worth running case by case.
Related guides
a rollover contract FAQs
What is a rollover contract?
A rollover contract is a new fixed-term business energy contract that a supplier creates automatically when the previous contract ends. The rates are usually well above the market and the term is typically 12 months.
Are rollover contracts legal?
For larger business customers, yes. For micro-businesses (under 100,000 kWh electricity, 293,000 kWh gas, or fewer than 10 employees), Ofgem 2014 reforms restrict rollover practices and the supplier cannot impose a new fixed-term contract without active consent.
What is a micro-business under Ofgem rules?
A business consuming less than 100,000 kWh of electricity per year, or less than 293,000 kWh of gas per year, or with fewer than 10 employees and turnover or balance sheet of no more than £2 million.
Can I exit a rollover contract early?
Check your contract; some suppliers allow exit early in a rollover term, others don’t. Microbusinesses can end a rollover at any time without a termination fee. After the window, exit fees typically apply for the remaining contract term.
How is a rollover different from out-of-contract?
Out-of-contract has no fixed term and can be ended on 30 days notice. Rollover is a new fixed-term contract that locks the customer in for the new term, with exit fees if leaving early outside the notice window.
How do I avoid being rolled over?
Track the contract end date, engage with the supplier renewal notice 60 to 90 days before the end, and either sign a new contract or formally terminate. A Letter of Authority to a broker on retainer handles this automatically across a portfolio.
When did Ofgem restrict rollover contracts?
In 2014, as part of changes to Standard Licence Condition 7A. The restrictions apply to micro-business customers. Larger business customers can still be subject to rollover terms under their original contract.
What rates are charged on a rollover contract?
Rollover rates are set by the supplier, usually well above the prevailing market. They are designed to recover risk on an unengaged customer rather than to win a renewal in a competitive process.