The renewal letter is the most consequential document in a small business energy contract and the one most often skimmed. It sets the renewal offer, the deadline to accept, and the default that applies if nothing is signed. The fields are largely standardised under Ofgem's Standard Licence Conditions for microbusinesses, and reading it as a structured document rather than a marketing piece changes both the negotiation and the outcome.
TL;DR
- Ofgem requires microbusiness suppliers to send a contract-end notice in the 30 to 90 day window before expiry, with principal terms in writing.
- The letter must state the current end date, the renewal offer or out-of-contract default, the deadline to accept, and how to switch supplier.
- A renewal letter is a negotiation document, not a closing letter; requesting the supplier's best renewal offer in writing while taking the meter to market is standard practice.
- If the customer does nothing, the contract typically falls onto deemed or out-of-contract variable rates that sit 30 to 50 per cent above negotiated fixed offers.
- The renewal window is also the only practical moment to challenge a misclassified microbusiness status before the rollover ban and other protections are tested.
Last reviewed: May 2026
What Ofgem requires the letter to contain
For microbusiness customers, the renewal notice is governed by the Ofgem Standard Licence Conditions for non-domestic supply. Suppliers must send a contract-end notice in the 30 to 90 day window before the existing fixed contract ends. The notice must state the current contract end date clearly, the renewal offer if one is being made, the rates that will apply if the customer does nothing, and instructions on how to switch supplier if the customer chooses to leave.
The principal terms of any new offer must be in writing before the customer signs. That includes unit rate per kWh, daily standing charge, contract length, payment method, and termination terms.
The catch is that the letter does not have to be flagged as urgent on its envelope. It can land alongside routine billing correspondence and look almost identical.
The typical structure of a renewal letter
Most UK supplier renewal letters follow a similar layout. The header references the account number and the supply point administration number. The first paragraph confirms the current contract end date. The second sets out the renewal offer: usually one to three options on different fixed terms, each with a unit rate, a standing charge, and the duration. The third sets out the default if nothing is signed by the deadline, typically a variable out-of-contract rate or a deemed contract rate. The fourth gives a deadline to accept. The fifth offers an option to discuss alternative arrangements.
An attached schedule then sets out the principal terms in full, including any auto-renewal language, billing arrangements, and dispute resolution information.
The 30 to 90 day window matters because it is the practical period when the meter can still be taken to market and switched away cleanly. Inside 30 days a switch can still be arranged, but timing and meter read coordination tighten significantly.
A worked example of a renewal letter read
A real-style letter to a small Manchester florist with a single-phase electricity supply might read as follows. Current contract end date: 31 August 2026. Renewal offer 1: 24-month fixed at 27.4p per kWh, standing charge 64.0p per day. Renewal offer 2: 36-month fixed at 26.1p per kWh, standing charge 64.0p per day. If nothing is signed by 1 August 2026 the supply moves to the out-of-contract variable rate, currently quoted at 41.8p per kWh and 78.5p per day. The letter encloses the principal terms schedule and lists the supplier's complaints process.
The reading task is then straightforward. Compare the renewal unit rates against the supplier's published business tariffs page if one exists, against quotes secured directly from at least three competitors, and against the broader DESNZ March 2026 non-domestic price release as a market reference. Confirm whether the renewal offer carries any embedded broker commission. Confirm whether the contract length matches the operational outlook of the business.
The out-of-contract rate in the example sits roughly 50 per cent above the longer fixed offer. That is the default penalty for taking no action.
The negotiation lever the letter creates
The renewal letter is not the final price. A short written reply requesting the supplier's "best renewal offer" while simultaneously taking the meter to at least two other suppliers is the standard pattern. The supplier knows the meter is contestable inside the 30 to 90 day window and frequently revises the original quote downwards when asked.
The negotiation lever works because the supplier has acquisition cost embedded in any new customer and retention is cheaper. In practice the supplier will often improve the quoted unit rate, the standing charge, or both, particularly on multi-year fixed offers. The first renewal offer is rarely the supplier's floor.
The lever is also operational. A small printing business in Leeds that consistently signs renewals at the first-letter price will pay more across a decade than one that runs the same negotiation each cycle, even where the operational profile is identical.
What happens if the customer does nothing
For microbusinesses, the rollover ban under the Ofgem Standard Licence Conditions stops the supplier from moving the customer automatically onto a fresh fixed-term lock-in. The supplier can, however, move the supply onto a deemed contract or an out-of-contract variable rate, which is almost always materially higher than any negotiated renewal.
An out-of-contract rate is not capped. There is no statutory ceiling that limits how much the supplier can charge a customer who has fallen out of contract.
The supplier is still required to honour the contract-end notice rules and to allow the customer to switch away at any point once out of contract.
Comparison: renewal letter outcomes
| Action | Effective rate | Term length | Switch ability |
|---|---|---|---|
| Accept first renewal offer in letter | Quoted fixed rate | 1 to 5 years | Locked until expiry |
| Request "best" offer and counter-quote | Typically 5 to 15 per cent lower than first offer | 1 to 5 years | Locked until expiry |
| Switch to new supplier in window | New supplier fixed rate | 1 to 5 years | Locked from new start date |
| Do nothing, fall to out-of-contract | Often 30 to 50 per cent above market | Rolling | Can switch at any point |
| Do nothing, fall to deemed contract | Variable, usually high | Rolling | Can switch at any point |
Regional standing-charge variation in the renewal offer
Standing charges in a renewal letter are not uniform across the UK. The Distribution Use of System charges, which feed into the standing charge component, vary across the 14 GB electricity distribution regions and across the gas transmission zones. A renewal quote that includes a 64p per day electricity standing charge in the Midlands distribution region may translate into 72p per day in the Southern Electric region or below 60p per day in the North Scotland region for an equivalent supply profile.
For small sites where standing charges can represent 20 to 30 per cent of the bill, this regional layer is part of the negotiation rather than a fixed input.
A renewal letter from a national supplier to a national multi-site business typically carries a single contracted standing charge that bundles the regional differences into one number; a single-site quote does not have that smoothing.
How the letter interacts with broker contracts
Where the original contract was placed through a third party intermediary, the renewal letter can come either from the supplier directly or from the broker on the supplier's behalf. Ofgem's non-domestic third party intermediary rules, phased through 2026, tighten the disclosure obligations on broker-led renewals, requiring clearer statement of any commission embedded in the quoted unit rate.
A renewal letter that arrives from a broker rather than the supplier is still subject to the Ofgem 30 to 90 day window rule on the underlying microbusiness contract, but the principal terms must be the supplier's principal terms.
Here is where it breaks for some SMEs. The broker letter can present a single renewal option presented as the supplier's best offer, when in practice the broker has placed the quote with the supplier most likely to pay the broker's commission rather than the supplier with the lowest unit rate.
The renewal window as a classification check
The renewal window is the cleanest moment to verify microbusiness status before any new contract is signed. A short written request to the supplier confirming which microbusiness threshold has been applied and on what data forces the answer onto the file before the next contract starts. If the answer is incorrect, the customer can supply evidence at this point and have classification corrected before the new contract takes effect, preserving the rollover ban and other protections.
The April 2024 Ofgem microbusiness consumer standards update reinforced this expectation, requiring suppliers to apply classification consistently across the customer lifecycle.
The renewal letter is, in that sense, both an offer document and a status checkpoint. A business that reads it as both gets more leverage out of the 30 to 90 day window than one that reads only the rate.
Editorial disclaimer. KaelTripton is an independent UK publisher. This article is editorial, not personal financial or energy procurement advice. Rates, caps, grant levels and supplier offers move; verify any figure with the named primary source before acting on it. KaelTripton does not earn commission from suppliers or brokers mentioned.
Frequently asked questions
When must the supplier send a renewal letter?
For microbusiness customers, in the 30 to 90 day window before the existing contract ends, under Ofgem Standard Licence Conditions.
What rate applies if the renewal letter is ignored?
For microbusinesses, the rollover ban prevents automatic re-fixing onto a new term. The supply falls to a deemed or out-of-contract variable rate, typically 30 to 50 per cent above the negotiated fixed market.
Is the first renewal quote usually the supplier's best price?
Rarely. A written request for the supplier's best renewal offer combined with two or three external quotes typically improves the quoted rate.
Can the customer negotiate the standing charge as well as the unit rate?
Yes, both fields are open to negotiation, although standing charges are often less flexible than unit rates because they cover fixed distribution costs.
Does the renewal letter cover broker commission?
Under Ofgem's non-domestic third party intermediary rules phased through 2026, broker-led renewals must disclose embedded commission more clearly. The customer can ask in writing whether the quoted unit rate includes a broker uplift.
Can a customer ask for microbusiness classification confirmation at renewal?
Yes. A short written request to the supplier asking which threshold has been applied and on what data is a standard step at the start of the renewal window.
Sources
- Ofgem - energy advice for businesses (microbusiness renewal rules, May 2026)
- Ofgem - energy policy and regulation (Standard Licence Conditions reference, May 2026)
- Ofgem - non-domestic third party intermediary rule changes (2024 to 2026)
- DESNZ - energy prices statistics, March 2026 release
- Citizens Advice - energy supply guidance for small businesses (May 2026)
- Ombudsman Services Energy - dispute resolution for microbusiness contracts (May 2026)