Energy supply contracts – What to keep in mind

Before the first energy delivery - what needs to be arranged?

Before energy can be supplied, a grid connection is required. If this has not yet been established, the following questions arise in particular:

• Connection timing: When will the connection to the energy network take place? Is the date fixed or dependent on conditions? For example, the connection date for heating networks is regularly dependent on obtaining the necessary permits and approvals. 
• Interim solutions: What happens if the existing, outdated energy system fails before connection to the new one? Has an obligation to provide an interim solution been agreed - and if so, on what terms?
• Interfaces: Who provides which services for the grid connection? Who owns the primary and secondary system components and what rights and obligations arise from this?

For complex project, close cooperation between the technical staff of both parties is essential. A common understanding of key parameters is crucial. It is also important to clarify what happens if agreed values are not met.

Challenges often also arise when it comes to pipe routing: do properties, private paths or gardens have to be crossed? In the case of condominiums, it is also necessary to regulate which rooms may be used for pipes and energy equipment. Unregulated points in this area can lead to delays and harbor potential for conflict.

Ownership of assets

If an energy supplier installs fixed equipment in a customer's building, there is a risk that these systems will become part of the building due to the principle of accession under property law. This risk can be minimized, for example with an easement, but here too the pitfalls lie in the details.

Price, performance and quantity

There are a variety of pricing models. Price lists are popular, which the energy supplier can often adjust unilaterally. It is also possible for energy to be purchased directly on the spot market. Finally, so-called cost-based energy prices are also common, where the customer pays an (indexed) basic price and a working price for the energy purchased.

The contractually owed output of the system and the amount of energy to be supplied or purchased are closely linked to this. These points often harbor potential for conflict. 

It is worth carefully checking the relevant contractual clauses, verifying assumptions and making calculation formulas comprehensible.

Duties and interruptions

Especially in large-scale projects where infrastructure must first be built, it must be clearly governed which party is responsible for what. Maintenance can be complex and expensive - and certain risks are difficult to calculate (as is currently the case with the quagga mussel in seawater networks).

Besides, what happens if the energy supply is interrupted? A repair can take time, and 72 hours without hot water often feels like an eternity for those affected. 

It is advisable to clearly define responsibilities, for example for troubleshooting, in order to avoid unpleasant surprises as far as possible.

Termination and its consequences

What happens when the contract ends? Do moving parts have to be removed? What happens to underground pipes on the customer's property?

In the euphoria surrounding the imminent conclusion of a contract, such questions often take a back seat. However, particularly in the case of terminations (including those for just cause), it should be clear what the consequences will be – and this is much easier to be clarified in advance than during a dispute.

Do you have questions about energy supply contracts?  Arrange a non-binding initial consultation with an expert via the contact form.