Can an electricity contract be cancelled if electricity prices rise dramatically?

Rising energy prices in 2025

The new year will bring changes for businesses, which will have to contend with higher electricity bills. From 1 January this year, energy prices are set on the basis of existing contracts and the current price lists of energy suppliers. Many contracts contain prices that are significantly higher than current market prices.

The reason for these changes is the amendment to the Act on Maximum Electricity Prices. Following the latest amendment in December 2024, the Act no longer provides for a price freeze on electricity for micro, small and medium-sized enterprises. The price, currently at 698 PLN/MWh, could rise to as much as 1,500 PLN/MWh.

The current situation poses a threat to businesses, as the costs of running a business will rise significantly. Consequently, the costs of all goods and services will also rise.

Terminating an electricity contract for businesses

A way out of this difficult financial situation may be to terminate the existing contract with the energy supplier and enter into a new, more favourable one. Under civil law, if a change in the terms of service provision (including price) is drastic and unforeseeable at the time the contract is concluded, this may constitute grounds for terminating the electricity contract.

It is important to remember that the customer is no longer obliged to use only the services of local energy companies. A business owner may choose the supplier’s offer that is most cost-effective for them, regardless of the energy company’s location.

Most energy suppliers provide ready-made forms which must be completed and sent in order to terminate an electricity contract.

An electricity contract concluded for an indefinite period

Most electricity supply contracts are concluded for an indefinite period. When terminating an electricity supply contract, it is essential to observe the appropriate notice period. The most common notice period is one month, but you should check the contract carefully. The Energy Law stipulates that the end user may terminate a contract concluded for an indefinite period without incurring costs, except for charges for energy consumed and for energy transmission or distribution services provided.

Fixed-term electricity contract

The situation regarding fixed-term contracts is somewhat more complicated, as terminating such a contract carries a high risk of contractual penalties being imposed. Under the Energy Law, an end user who is a micro or small business may terminate a fixed-term contract without incurring costs or compensation other than those specified in the contract. The amount of such costs and compensation may not exceed the amount of direct economic losses incurred by the energy company as a resultof the customer terminating the fixed-term contract. It follows from the provisions that the imposition of a contractual penalty or compensation in full must be based on the terms of the contract or the General Terms and Conditions of the Contract. It is common practice for energy suppliers to include clauses regarding contractual penalties; therefore, before terminating an electricity contract, it is worth reviewing the provisions on penalties and calculating whether terminating the business electricity contract at that particular time will be cost-effective.

There are two commonly used methods for calculating contractual penalties. The first depends on the amount of energy the customer has committed to purchase. The contractual penalty is based on the difference between the amount the customer committed to consume and the amount of energy actually consumed. The second method of calculating the penalty is based on the number of months remaining until the end of the contract. The number of months by which the contract is shortened is multiplied by a fixed amount specified in the contract.

Importantly, it seems unreasonable to impose a penalty for subsequent years of energy supply, as the supplier has not incurred any direct financial losses. If an excessive penalty is imposed, one may attempt to negotiate it by presenting relevant arguments and invoking the provisions of the Energy Law. If negotiations fail, the matter can be taken to court to have the contractual penalty reduced.

Terminating an electricity contract – summary

Terminating an electricity contract due to price increases is certainly possible. However, this may result in contractual penalties being imposed by the energy supplier. Before terminating a business electricity contract, we recommend a thorough review of the contract, attempting to negotiate it to reduce prices, and contacting HWW Hewelt Wojnowski Lindner & Partners.