The short answer
An early-termination fee is the penalty for cancelling a fixed-rate energy contract mid-term. Residential ETFs run $50-$300 flat; commercial ETFs run $0.02-$0.04/kWh of remaining usage. Pay the ETF only when the new rate beats the old by enough to recover the fee inside 6 months. Many residential contracts have $0 ETFs — filter for them aggressively.
An early-termination fee (ETF) is the contractual penalty a supplier charges if you cancel a fixed-rate contract before the term ends. ETFs exist because the supplier has hedged your usage in the wholesale futures market — when you cancel mid-term, they have to unwind those hedges. For residential contracts, ETFs typically run $50-$300 flat. For commercial contracts, often $0.02-$0.04/kWh of remaining contracted usage. This guide explains when paying the ETF is worth it, when it is not, and the 5 contract clauses every customer should check before signing.
When the ETF is worth paying
The ETF is worth paying when the new rate beats the old by enough to recover the fee inside 6 months. The math: divide the ETF by the monthly savings (new rate × monthly kWh - old rate × monthly kWh). If the result is < 6, pay the ETF and switch. If > 12, stay put and re-shop at contract end.
Example: residential ETF is $200, current rate 14¢/kWh, new offer 11¢/kWh, monthly usage 900 kWh. Monthly savings = (0.14 - 0.11) × 900 = $27/mo. Payback = 200 / 27 = 7.4 months. Marginal — depends how long you're in this house. If 12+ months remaining on lease, pay the ETF.
For commercial: same math but with bigger numbers. ETF on a 2-year commercial contract with 18 months remaining at $0.03/kWh × 200,000 kWh/yr × 1.5 yr = $9,000. Worth paying only if new rate is significantly better.
No-ETF contracts — they exist for residential
Many residential supplier contracts have $0 ETF — the supplier eats the hedge-unwind cost as part of customer-acquisition cost. These are typically 12-month terms. Filter for them aggressively when shopping on PaPowerSwitch / Apples-to-Apples / Power-to-Choose.
On commercial contracts, $0 ETFs are rarer but exist for shorter terms (12 months) and for highly-sought-after load profiles. Negotiate aggressively if you have leverage.
The trade-off: $0-ETF contracts often price 0.1-0.3¢/kWh higher than ETF-backed contracts. The premium covers the supplier risk. For residential, the premium is usually worth paying.
Infographic
ETF vs no-ETF — which wins on expected value
The 5 contract clauses to check before signing
1. ETF formula: flat fee or per-kWh? Read carefully. A $50 flat fee on residential is benign; $0.04/kWh × 18 months on commercial is thousands. 2. Renewal terms: auto-renew at variable, lapse to PTC, or require explicit re-sign? Auto-renew at variable is the renewal-trap pattern — avoid it. The avoiding-the-renewal-trap guide walks this in depth.
3. Rate-change clauses: any conditions under which the supplier can change your "fixed" rate? Some contracts have force-majeure clauses that allow rate adjustment after extreme market events. 4. Move clauses: most contracts let you cancel without penalty if you move out of state. Confirm wording.
5. Material-change clauses: most state PUCs require suppliers to notify you of material contract changes and give you a window to cancel without ETF. Confirm your state rule. The cooling-off-period-energy-supplier-rights guide covers the post-signing cancellation window.
- 1. ETF formula — flat or per-kWh?
- 2. Renewal terms — auto-renew, lapse, or re-sign?
- 3. Rate-change clauses — any force-majeure?
- 4. Move clauses — can you cancel on relocation?
- 5. Material-change clauses — what triggers no-fee cancellation?
Recap
Bottom line
Early-termination fees (ETFs) are the friction that keeps customers in supplier contracts they no longer want. Most residential ETFs run $50 to $300 — small enough to absorb if a materially better offer appears mid-contract. Commercial ETFs can be much larger and are sized to discourage cancellation; reading the ETF formula carefully before signing prevents costly surprises.
For most US households, the practical rule is: avoid contracts with ETFs above $200, prefer contracts with no ETF or pro-rated ETF, and use the cooling-off-period-energy-supplier-rights protection if you discover an ETF clause you missed within the rescission window. The avoiding-the-renewal-trap and how-to-cancel-energy-supplier-contract guides cover the related contract management decisions.
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