Unfavourable energy contract for companies – is it possible to negotiate a change in terms?

The concept of freedom of contract comprises several elements, including the freedom to decide whether to enter into a contract and the ability of the parties to determine its terms as they see fit.

In the energy market, one can observe a phenomenon whereby energy companies restrict this freedom. In order to conclude electricity supply contracts, customers are often presented with draft contracts which are frequently treated by both parties as so-called adhesion contracts, i.e. contracts concluded by one party acceding to an agreement in which the most important terms have been determined by the other party.

It is worth emphasising that the principle of freedom of contract is not absolute and is subject to certain restrictions arising, among other things, from legal provisions. An example of such a restriction is the issue of billing periods in electricity supply contracts. A business can influence the length of the billing period only by selecting the appropriate tariff group. In other words, within the selected tariff group, it is not possible to negotiate the length of this period individually.

However, for business customers, it is possible to negotiate more favourable contractual terms, which is worth bearing in mind, as properly negotiated conditions can significantly reduce contractual risks, improve the company’s financial liquidity and increase flexibility in fulfilling contractual obligations.

The possibility of negotiating with the electricity supplier. Is it possible to withdraw from an electricity supply contract?

Businesses have the opportunity to negotiate a range of provisions with the electricity supplier that can significantly improve the terms of the contract. The most commonly negotiated terms include:

• the amount of active energy charges (MWh) and the commercial charge;

A particularly important aspect to bear in mind when negotiating an electricity supply contract is ensuring price stability throughout the contract period, which helps minimise the financial risk associated with fluctuations in energy prices on the market.

• contractual capacity and the conditions for amending it;

Contractual capacity, i.e. the maximum amount of energy a company can consume, is a key parameter for industrial plants. The ability to flexibly adjust contractual capacity during the contract period is important, particularly in the face of changing production needs;

• choice of tariff group;

The tariff group determines how electricity is billed and affects the costs of consumption. Depending on their energy consumption profile, a business can choose the group best suited to its operations.

• the term of the contract and the terms of termination of the electricity supply contract;

The length of the contract term is crucial in terms of cost stability and flexibility of cooperation. Businesses can negotiate both the duration of the contract and the terms for early termination of the business electricity contract, allowing the contract to be adapted to changing market needs.

• Payment terms.

The possibility of extending the payment term, e.g. from 14 to 32 days, can have a significant impact on a company’s cash flow, particularly for large energy consumers. Negotiating this clause often depends on the size of the company.

Furthermore, for many businesses, the ability to renegotiate the terms of the contract during its term is of key importance. Such a provision gives the customer the opportunity to adapt the contract to changing market rates, which can bring tangible benefits to the business.

The influence of the President of the Energy Regulatory Office on the content of the contract

The President of the Energy Regulatory Office (“URE”) plays a key role in resolving disputes concerning energy contracts, acting within the limits set by the Energy Law.

On the basis of an application for dispute resolution submitted pursuant to Article 8(1) of the Energy Law, the President of the URE is empowered to shape the contract between the disputing parties with appropriate terms in a manner consistent with the limits of their freedom of contract. The decision of the President of the Energy Regulatory Office should comprehensively regulate the content of the contract (taking into account the uncontested provisions), rather than merely obliging the parties to conclude it. If the parties have agreed on specific provisions, the President of the Energy Regulatory Office should take them into account, provided that they do not contravene mandatory provisions.

In summary, the principle of freedom of contract, whilst fundamental in civil law, is subject to significant restrictions in the context of the energy market. However, businesses have the opportunity to negotiate many key provisions in electricity supply contracts, such as the amount of charges, payment terms, or the duration of the contract, which allows them to tailor contracts to the specific needs of their operations. The President of the Energy Regulatory Office also plays a significant role in resolving contractual disputes; in certain cases, they may influence the content of contracts being concluded, taking into account the interests of the parties and the provisions of the law. If you are interested in issues such as withdrawing from an electricity contract, cancelling an electricity contract, or terminating an electricity contract, please contact HWW Hewelt Wojnowski Lindner & Partners to ensure your company receives professional support at every stage of the negotiation process.

Author

Aleksandra Chomicka

Radca prawny, Senior Associate

She gained experience in providing day-to-day legal services to individuals and entrepreneurs at a number of law firms in Warsaw specializing in corporate law and family law. At the firm, she provides services to entrepreneurs and individual clients in the field of contract and business law. As part of her professional practice, among other things, she analyzes, reviews and creates civil law contracts, prepares legal opinions in the field of civil and business law, and drafts and prepares corporate documents,…

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