Business Energy Contracts Explained

Fixed vs Flexible Business Energy: Which Is Better?

The choice between fixed vs flexible business energy contracts is one of the most important decisions you'll make. Each has pros and cons, and the right choice depends on your business size, risk tolerance, and energy market expertise.

Fixed contracts are recommended for the vast majority of businesses — especially SMEs — because they provide price certainty and protection against market volatility. Flexible contracts can be beneficial for larger businesses with energy expertise who can actively monitor the market and absorb price fluctuations.

Below, we explain both options in detail so you can decide which is right for your business.

Fixed-Rate Contracts

A fixed-rate contract locks in your unit rate (price per kWh) and standing charge for the entire contract term — typically 1, 2, or 3 years. This means your price per unit won't change regardless of what happens in the wholesale energy market.

Pros: Price certainty for budgeting, protection against energy price rises, simple to understand. This is the most common and recommended contract type for most businesses.

Cons: If wholesale prices fall, you won't benefit from lower rates. Some fixed contracts have exit fees if you need to leave early.

Who it suits: Most businesses — especially those that want predictable energy costs and protection against market volatility. We recommend fixed contracts for the majority of our clients.

Flexible Contracts

A flexible (or variable) contract means your unit rate can go up or down during the contract term, typically linked to wholesale market prices. Some flexible contracts allow you to 'fix' your rate at any point during the term.

Pros: You can benefit if wholesale prices fall, more flexibility than fixed contracts, ability to react to market conditions.

Cons: Prices can rise unexpectedly, harder to budget, requires active monitoring of energy markets. If prices rise significantly, your costs could increase substantially.

Who it suits: Larger businesses with energy expertise, businesses that can absorb price fluctuations, or those who believe wholesale prices will fall. Not recommended for most SMEs.

Out-of-Contract Rates

Out-of-contract (OOC) rates — also called deemed or default rates — are what you're charged when you don't have a valid energy contract in place. This happens when: you move into new premises without setting up a contract, your fixed-term contract expires without renewal, or you're in a dispute with your broker.

These rates are the most expensive in the market — typically 30-50% higher than negotiated rates, and sometimes even more. A business spending £1,000/month on a negotiated rate could be paying £1,300-£1,500/month on out-of-contract rates — that's £3,600-£6,000 wasted per year.

The worst part? Many businesses don't realise they're on out-of-contract rates. Brokers aren't required to proactively notify you, and the rates are applied automatically. This is the single biggest way businesses waste money on energy — and it's completely preventable.

If you think you might be on out-of-contract rates, contact us immediately. We can arrange a proper contract and start saving you money within weeks.

Renewal Timelines

Most business energy contracts can be renewed or switched during a 'renewal window' — typically 1-6 months before your contract end date. During this window, your current broker will send a renewal offer, and you can also compare rates from other brokers.

Critical timeline: 120 days before your contract ends, your broker must notify you of your renewal terms. 49 days before, you can switch brokers without exit fees. If you do nothing, you'll automatically roll onto out-of-contract rates.

The biggest mistake businesses make is missing this window. If you don't act within the renewal window, you'll be stuck on expensive out-of-contract rates until you arrange a new contract — which could take weeks or months.

We track renewal dates for all our clients and proactively contact them 3-6 months before their contract ends, giving plenty of time to compare the market and arrange a switch.

Contract Negotiation Advice

Energy contracts are negotiable. Brokers have flexibility on pricing, especially for larger usage or multi-site businesses. The key is to compare multiple brokers and let them compete for your business.

As a broker, we negotiate directly with brokers on your behalf. Because we bring volume (multiple clients), we can often secure rates below what a business would get approaching the broker directly. We also know which brokers are currently competitive and which are pricing high.

If you're negotiating directly, always get quotes from at least 3-4 brokers. Let each know you're comparing. Don't accept the first offer — brokers often have room to improve their initial quote, especially if they know you're comparing.