How to Escape a Bad Contract in Ontario

Posted April 11, 2016

Getting Out of a Bad Contract

Since the energy markets first deregulated in Ontario in the early 2000s thousands of homeowners and small businesses have switched their energy supply to a third party retailer. Unfortunately, many have found that their new rates were not quite as low as expected – or in some cases promised – and so we have attempted to exit those contracts. At that point, many found themselves faced with extremely high cancellation fees and were locked into expensive electricity and natural gas contracts.

EnPowered does not charge any cancellation fees on its electricity contracts whatsoever, but if you are a customer who is currently stuck on a bad energy contract, there is hope. If you are on an electricity or natural gas contract with another retailer and you wish to cancel your contract, you are protected by the Energy Consumer Protection Act of 2010. This act allows you to cancel a contract for different reasons, most of which are identified below. In these cases, you will not have to pay any cancellation fees or penalties whatsoever.

The following is a set of rules and regulations for Homeowners and Small Businesses in Ontario only. These regulations were passed into effect in 2010 and are in effect for any contracts that were entered into after 2011, which should be most, if not all, contracts today. If you are a large commercial customer, you have far fewer options available to you but we have explained some of your options at the bottom of this article.

In general, there a few steps at which you as a customer are able to cancel your contract for any reason and not pay any cancellation fees. These steps are:

  1. Your contract receipt
  2. Your 10-day cooling-off period
  3. Your 30-day testing period
  4. Your account verification process
  5. Incorrect contract completions

We will dive into each of these steps in more detail below as well as how to cancel your contract after all of these steps.

Contract Receipt

When you initially agree to change your energy supplier, your electricity retailer or gas marketer must provide you with a text-based copy of the contract, including all terms and conditions, and you must acknowledge its receipt. Otherwise, the contract will become invalid.

If you enter into a contract in person, you are considered to have acknowledged receipt of the contract when you sign it. If you enter into a contract over the internet, you are considered to have acknowledged receipt of the contract when the contract is sent to you by e-mail by the electricity retailer or gas marketer. If you enter into a contract by mail, you are considered to have acknowledged receipt of it when you mail a signed copy of the contract back to the electricity retailer or gas marketer.

10-Day Cooling-Off Period

When you sign-up to a contract with a retailer for either electricity or natural gas, you have a 10-day “cooling-off” period to review your decision. This 10-day period starts when you are either given an email or a physical copy of your new contract. During this period, you can take the time to read the contract in detail on your own, you can research any questions you may have, and you can take the time to get comfortable with your choice.

At any point during this 10-day period you can decide to cancel your contract by contacting the company and requesting to cancel your contract. You will not be required to pay any cancellation fees and your service will continue without interruption. During this 10-day period the retailer should not be pressuring you in any way, if they do you can nullify the contract.

30-Day Testing Period

If you have agreed to stay with a retailer you have 30 days to receive your first electricity bill at your new price and understand the effect of this new price on your bill. You can do additional research on your own time, seek advice where needed, and ask your company for help. If at any point during this 30 day period you feel like you no longer want to be on your contract, you can cancel your contract by contacting the company and requesting to cancel your contract. You will still need to pay that one bill for the first 30 days, but you will not be charged any cancellation fees.

Please note that this additional right to cancel without paying a cancellation fee does not apply to natural gas contracts.

Account Verification

At some point after your 10-day cooling-off period, but within 45 days, your company will contact you by phone to confirm that you want to continue with the new contract. The purpose of this call is to ensure that you are aware of the new plan that you are signing up for and that you understand how the new plan will work. This call has been put into place in an attempt to ensure that door-to-door sales reps are not lying to end customers. As a result, this phone call must comply with a script approved by the Ontario Energy Board (OEB) and it must be recorded by your new supplier. If you ask for a copy of the recording, it must be sent to you within 10 days.

Incorrect Contract Completion

The last step where you are able to cancel your contract free of charge is if the individual who sold you your new energy plan failed to comply by OEB regulations. If at any point your company failed to comply to OEB rules, you as a consumer are able to notify the OEB to nullify your contract.

Below is a list of example situations where non-compliance would result in a nullified contract:

  1. The sales rep who talked to you in-person told you they were affiliated with the government, your utility, or the OEB
  2. The sales rep who talked to you was not wearing an ID badge and did not provide you with their business card
  3. The sales rep did not leave you a copy of your contract, showed you documents that were misleading or false, or was unwilling to provide materials to you
  4. You were not asked to sign a Price Comparison Form, and were not given a copy of this form
  5. You were not asked to sign a Disclosure Statement, and were not given a copy of this form
  6. You were not given the proper forms; ensure that the dates of your price comparison form and disclosure statements match the date when you signed them otherwise they are invalid
  7. The person who signed the contract was not the account holder or their agent
  8. You were not left a copy of all the documents that you signed

If any of the above situations apply to you, then you might be able to have your contract cancelled without a cancellation fee due to non-compliance. The other potential situation of non-compliance is if the sales rep misled you into believing inaccurate information, the most common example being if the sales rep did not explain that the Global Adjustment would be added to your bill. This last example is the hardest to prove but may still be used to cancel your contract with the OEB.

If any of the above situations apply to you, contact the OEB at this link here. The OEB is responsible for representing consumers and ensuring that companies in the energy industry comply with all rules and regulations.

Account Cancellation

If you are past your 10-day cooling-off period, and after your 30-day testing period, and you have already verified your contract, then you are locked-into your contract. At this point you will be required to pay a cancellation fee if you want to cancel your electricity or natural gas contract.

The contract that you received from your company must contain a description of the circumstances in which the contract can be cancelled by you and the amount of any cancellation fees you may have to pay in each circumstance. Note that not every company charges cancellation fees. Although most companies do, EnPowered does not charge any cancellation fees on its electricity contracts whatsoever.

The maximum cancellation fee that can be charged to most residential consumers is:

  • for electricity contracts: $50 for each year, or part year, remaining on the contract
  • for gas contracts: $100 for each year, or part year, remaining on the contract

Annually, a typical homeowner uses about 9,600 kWh of electricity and about 3,000 cubic meters of natural gas. For these typical homeowners, you are protected by the above maximum cancellation fees. Unfortunately, maximum cancellation fees are calculated differently for consumers whose consumption of electricity or gas is higher or where the contract is to supply electricity or gas to a property that is used primarily for business purposes.

Big Users or Business Cancellation

If you are a homeowner who uses a lot of energy, or are a business who signed with a energy retailer, your cancellation fees are calculated differently. It is important to note though that if you use less than 150,000 kWh per year or 50,000 m3 per year all of the other protections mentioned above still apply to you. The only thing that does not apply to you is the maximum cancellation fees.

If you use between 15,000 kWh and 150,000 kWh of electricity per year, your maximum cancellation fee is set at 1.5 cents/kWh remaining on your contract in months. So, for example, if you use 120,000 kWh per year and you have 20 months remaining on your contract, your maximum cancellation fee would be calculated as:

Electricity Cancellation Fee Calculation Template

If you use between 3,500 m3 and 50,000 m3 of natural gas per year, your maximum cancellation fee is set at 5.0 cents/m3 remaining in your contract in months. So, for example, if you use 12,000 m3 per year and you have 20 months remaining on your contract, your maximum cancellation fee would be calculated as:

Gas Cancellation Fee Calculation Template

Commercial or Large Business Cancellation

Unfortunately for those users who consume more than 150,000 kWh per year or 50,000 m3 per year, the OEB does not offer any additional protection on your cancellation fees. Within your contract, a clause must contain a description of the circumstances in which the contract can be cancelled by you and the amount of any cancellation fees you may have to pay in each circumstance.

These fees can be quite large, but unfortunately there is no mechanism by which you can lower these fees. Also, large volume consumers do not get a 10-day cooling-off period, or a 30-day testing period, or an account verification call. The only recourse available to you is if you feel that your sales rep misled you into signing a contract, then you can take this to your supplier and request that the contract be nullified. In general, though, the OEB does not protect large businesses and you will be required to work directly with your supplier yourself.

Other Cancellation Advice

When you want to cancel your existing contract you will first need to call your energy supplier directly. They will then provide you with an estimate of what your cancellation fee would be. In general, this “estimate” will be higher than the actual cancellation fee. For example, if you are a homeowner your supplier may state that your cancellation fee is estimated to be about $1,000 when in fact, by the above regulations, they are not allowed to charge any more than $250 on a 5-year electricity contract.

If you have any questions on your current energy contract, are looking to cancel an existing contract, or want to know more about how EnPowered can help you, feel free to comment below or reach out to us directly.