Is a lock-in clause in an electricity contract legal?
Do you want to switch electricity company, but you are not sure whether electricity contracts include a lock-in period? We explain the small print in electricity contracts.
At Holaluz, we have always preferred people to stay with us because they feel comfortable, without lock-in periods in electricity contracts that tie them down with financial penalties if they decide to leave. As one of the leading electricity companies with no lock-in period, we believe our customers should have the freedom to choose without being tied down. However, although there had been talk of making lock-in clauses in electricity contracts illegal, some electricity companies still impose them, either in the electricity supply contract itself or linked to maintenance services. These are the different cases and this is how you can deal with them.
How do you know if you have a lock-in period in your electricity contract?
It is a classic situation: you are thinking about switching electricity company for whatever reason and doubts start to come up. One of the most common, if not the most common, is: do I have a lock-in period in my electricity contract? Will I be able to switch electricity company?
The logical option would be to review your contract, of which you should have an online or physical copy that you can check at any time. Even so, sometimes it is not entirely clear whether what is stated in the contract is simply its duration, which is usually one year —in our case it is stated this way and is merely a formality— with no consequences if you decide to leave, or whether it is a lock-in clause in the electricity contract that involves a financial penalty if you switch electricity company before 12 months have passed from the start date.
If you are with Holaluz, as we said, you will not have any lock-in period. In other words, even if you see that the contract has a duration of one year, this is something that must be stated formally —it is the established duration— but it does not tie you down in any way. Our contract is renewed annually by tacit agreement, meaning that if you do not tell us otherwise, we understand that you want to continue :)
If in doubt, call or write directly to your electricity company so they can clarify it for you.
Is it legal to have a lock-in clause in electricity contracts?
The answer is yes, although with certain limitations. The lock-in period in an electricity contract cannot be longer than one year, and the penalty imposed if you leave earlier must not exceed 5% of the contract price for the estimated energy pending supply. If, in your case, you verify that any of this is not complied with, you would be facing an illegal lock-in clause and you can contact Consumer Affairs or a similar body. In other words, you can be penalised for switching electricity company if you do so before time and your contract states it, but always within a legal limit.
On the other hand, there is a withdrawal period at the start of the contract, which is 14 days for all companies from the formalisation of the switch or new registration. If during that period you want to switch electricity company, you have the right to do so without the lock-in clause in the electricity contract having come into force and, therefore, you will not have to pay any penalty. The only thing the company you are leaving should charge you for is those 14 days during which you had your electricity supply with them, a period they must detail on the bill they issue you.
And if you have already made sure that you can leave without looking back and want to switch to Holaluz to have an electricity contract with no lock-in period… you can get it done in 3 minutes!
At Holaluz, everything is as simple as choosing us: no strings attached, no penalties and no lock-in period. Even common procedures such as changing the contract holder at Holaluz are carried out quickly and with no hidden costs, because we believe energy should give you freedom, not complications.
I want to sign up with HolaluzHidden lock-in periods in additional services linked to electricity contracts
The most common lock-in period in an electricity contract is the one that affects the entire supply contract itself, but there are exceptions. Some companies establish compulsory annual payments for certain additional services, such as a maintenance service. In these cases, the lock-in period that an electricity supplier may impose is not linked to the main contract, but to those extras, which creates confusion among many customers who believe they are free of penalties when, in reality, they are still tied to them.
This means that, even if your electricity contract does not mention a lock-in period and you are not penalised for switching electricity company, you may still have to pay the full year for that additional service to your former company, despite having left “freely”.
At Holaluz, we do not offer this type of additional service because we believe it is completely unnecessary. We believe in clear contracts with no lock-in period, so customers always have the freedom to choose.
Therefore, our advice is that if you contact any supplier to ask whether you have a lock-in period in your electricity contract, do not forget to ask about these types of “hidden” cases.
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