What “Material Change” Clauses Mean for Your Energy Contract

When signing a commercial energy contract, most customers focus on price, contract length, and supplier reputation. But overlooking the “material change” clause can result in unexpected costs or early termination fees. Don’t let a hidden contract clause blindside you; discover the contract pitfall even savvy energy buyers miss and learn what you need to know to safeguard your business. 

What Is a "Material Change" Clause? 

A material change clause gives your energy supplier the right to reprice, pass through additional costs, or terminate the agreement if there’s a significant change in your energy usage or business operations (i.e., major changes to your facility) during the contract term.  

These clauses are particularly common in fixed-rate energy supply contracts, where the supplier risks financial losses if your actual energy consumption diverges sharply from your historical usage or the original agreement. 

How Does a Material Change Clause Work? 

• If your business drastically increases or decreases energy usage, for example, by expanding, downsizing, or changing your hours of operation, it could trigger the clause. 

• Typical definitions of "material change" might include a swing of more than 25% from your monthly usage for two consecutive months, or any other threshold defined in your contract. 

Once triggered, the supplier may then adjust your rates, pass through new costs, or even terminate the contract. Why the strict terms? Well, suppliers include this protection because they purchase energy on your behalf based on what they expect you’ll use. Long-term changes to your load can impact their procurement strategies, especially in volatile energy markets. 

Examples of a Material Change 

• Adding or removing equipment that significantly impacts energy consumption 

• Expanding your facility or adding a shift 

• Shutting down part of your operations or temporarily closing 

• Unplanned renovations or construction 

• Long-term deviations from “business as usual” energy profile 

Material Change vs. Bandwidth Clauses 

While bandwidth clauses set a range for normal usage fluctuations, material change clauses address larger, sustained deviations outside the expected usage.  

Breaching a bandwidth clause might mean paying “off-contract” rates for over- or under-consumption, while a material change clause can trigger a full contract repricing or early termination. 

What Should Commercial Customers Do? 

• Read your contract carefully: Understand exactly how your supplier defines “material change” and what rights they reserve. 

• Calculate your baseline: Know your historical energy usage before committing. 

• Proactively communicate changes: If you are planning major operational changes that could impact your load, notify your supplier in advance. 

Why It Matters 

Material change clauses aren’t just boilerplate legal language; they can have real financial consequences if your business shifts unexpectedly. A clear understanding of how these clauses work can protect your business from surprise charges and ensure your energy strategy remains aligned with your operations.  

Have questions about your contract? Contact our Energy Experts to learn how we approach key contract terms—and what kind of supply plan best fits your goals.