Business energy contract types can have a huge effect on how much your electricity or gas costs.
There are two main types of contract: fixed rate and variable rate. Sounds simple enough so far? Unfortunately, it’s not! It starts to get complicated as soon as you look at the detail. For instance there’s lots of different kinds of fixed and variable rate contracts. To make matters even worse, a fixed rate contract may be subject to variable and you should ensure to read the terms and conditions of your energy contract very carefully!
Our guide to business energy contracts below will give you basic understanding of what’s available and the pros and cons of each.
Fixed Rate Energy Contracts
If you prefer to know what you’ll be paying for electricity and gas for the next few years, or so, and don’t mind paying a little more for your energy (because the supplier has built the risk of future energy price rises into your fixed price) then this is the contract for you. The unit price (kWh) you pay is fixed, but your bills do vary according to how much energy you use. Saying that, fixed rate contracts are great for peace of mind and, in terms of admin, are easy on the accounts department! The downside is that if energy prices fall you miss out on the savings and you’re still subject to variations in things like energy transmission and distribution costs. Your Energy Check consultant will advise you on the future energy cost implications of this to your business.
Variable Rate Energy Contracts
These contracts ‘do what it says on the tin’ – energy unit prices vary with the market for the duration of the contract. The unit price you pay on these contracts is often cheaper than fixed contracts, because you’re taking the risk of price fluctuations. If energy prices fall, then you pay less for your business electricity or gas! On the other hand, energy price rises get passed on to you straight away, making budgeting and administration slightly harder work. There are ways we can forecast future electricity and gas prices and your Energy Procurement Expert will present this to you.