The introduction of the government’s Solidarity Shield temporarily protected businesses from the effects of price rises, but from 2025 this protection has been scaled back, leaving many businesses in a difficult position. Could terminating an energy supply contract have financial consequences, and if so, is there a way to avoid them? In this article, we discuss the key aspects of this issue.
Termination of an energy supply contract by a business
The Solidarity Shield, introduced as a measure to protect against sharp rises in energy prices, covered both households and businesses in the SME sector. However, from 1 January 2025, businesses were excluded from this protection. This means that:
- energy prices for businesses are determined on the basis of existing contracts and current price lists/tariffs of energy suppliers,
- many contracts contain prices that are significantly higher than current market prices.
As a result, businesses are increasingly scrutinising the terms of their contracts and invoices, concluding that continuing with their current contracts is uneconomical. The most common course of action is to terminate their electricity contract, which often carries the risk of incurring contractual penalties.
The mechanism of contractual penalties for terminating an electricity contract
Consequently, most businesses decide to terminate their electricity contract with their current energy supplier. Depending on the structure of the contract, some of them provide for contractual penalties or similar provisions, e.g. a lump-sum compensation. For the most part, the contractual penalty provisions are set out in the General Terms and Conditions (GTC), which usually apply in the event of early termination of the contract or the inability to perform it due to the customer’s fault. Within this second category, sellers often cite the following circumstances: revocation of a power of attorney, loss of legal title to the energy supply facility, or the removal of the meter and decommissioning of the energy supply facility.
However, as a result of the above market circumstances, the energy supply contract is most often terminated by the submission of a notice of termination. If the provisions of the GTC provide for the imposition of a contractual penalty for the termination of an electricity supply contract or the termination of an energy supply contract following a notice of termination, the energy supplier will, as a rule, impose the contractual penalty.
Waiver of contractual penalties for terminating an electricity supply contract
In some contracts, however, energy suppliers waive the imposition of contractual penalties or significantly reduce their amount for certain categories of customers. This primarily applies to customers who are natural persons conducting business activity, provided that the contract is not of a professional nature for that customer. This means that the business activity conducted by the customer is not related to the broadly defined generation, processing, storage, transmission or distribution of energy, nor to the provision of services within the energy sector. In such cases, the customer is treated as a quasi-consumer, and therefore the terms of the contract must be adapted in accordance with the regulations applicable to consumers. In such situations, suppliers most often amend the content of the Contract and the General Terms and Conditions, removing provisions regarding the possibility of imposing a contractual penalty for terminating an energy supply contract or cancelling an electricity contract. Consequently*,* where specific provisions are introduced in relation to businesses with quasi-consumer status*,* they may not be obliged to charge contractual penalties in the event of termination of an electricity contract.
For other businesses, contracts usually provide for an obligation on the part of the customer, in the event of termination or cancellation of the electricity supply contract, to pay a contractual penalty calculated in the manner specified in the Contract. Most often, energy suppliers provide a formula for its calculation, taking into account a range of different factors, including, amongst others, the number of months remaining until the last day of the supply period or the notice period for terminating the energy supply contract, or the projected energy volume.
Provisions of energy law regarding contractual penalties
Under energy law, an 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. In the case of a fixed-term contract, an end user who is a micro or small enterprise may terminate a fixed-term contract without incurring costs or paying 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 result of the termination of the fixed-term contract by the customer.
Therefore, in the event of termination of an electricity contract during the current sales period, it appears that the energy supplier may suffer direct losses due to the execution and logistics of supplies and the performance of the contract. However, in the case of supply periods for subsequent years, the imposition of a contractual penalty in relation to all customers appears unjustified, as the supplier has not yet incurred any direct economic losses, since the actual fulfilment of the contract has not yet commenced. For example, if the termination of an electricity contract relates to sales periods scheduled for subsequent years, the energy supplier has not yet incurred costs associated with the supply of energy, which may provide grounds for challenging the penalty.
Possible ways to terminate an electricity contract
If the supplier imposes a contractual penalty, the business may take appropriate action. It is advisable to begin by negotiating with the supplier, presenting arguments regarding the disproportionate nature of the penalty in relation to the losses incurred. If no agreement is reached, the matter may be brought before the court. However, under the provisions of the Civil Code, it is possible to reduce the penalty if the contractual penalty is grossly excessive. This, however, depends on the individual circumstances of the case.
Penalties for terminating an electricity contract – summary
Terminating an electricity supply contract may entail the payment of contractual penalties, but in some situations these can be avoided or significantly reduced. It is crucial to analyse the content of the contract and the General Terms and Conditions in detail, as well as to understand the relevant legal provisions. It is worth bearing in mind the possibility of negotiating with the supplier and the right to challenge the validity of the penalty in court.
Businesses should make informed decisions, seeking legal advice to effectively safeguard their interests and minimise the financial risks associated with terminating the contract. If you are interested in issues such as withdrawing from an electricity contract or terminating an electricity supply agreement, please contact HWW Hewelt Wojnowski Lindner i Wspólnicy to ensure your company receives professional support at every stage of the negotiation process.
She specializes in civil, commercial and business law. In the corporate and energy department, her activities are mainly based on providing corporate services to companies, reviewing and preparing commercial contracts, drafting litigation and non-litigation pleadings and preparing analyses and legal opinions, particularly in the sphere of business law and energy law. She also has professional experience in administrative and civil proceedings, which she gained in Warsaw law firms. She supports the Firm's…
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