Business energy contract types explained

We don't recommend one universal contract type. The right structure depends on your appetite for certainty, your view of the market, and how you use energy. Use this guide to understand the options, then request a review to discuss what fits your business.

Fixed-price contracts

What it means: The unit rate and standing charge are agreed at the start and fixed for the full contract term.

Potential advantages

• Budget certainty for the full term
• Protection from wholesale market volatility
• Simple to forecast and model

Potential considerations

• No automatic benefit if wholesale prices fall
• Early exit may incur termination fees
• You commit to the rate for the full term

Suitable customer profile

Businesses that value predictability and want to lock in a known rate for budgeting.

Questions to ask before signing

• What is the exact unit rate and standing charge?
• What is the contract length and end date?
• Are there early-termination fees?

Variable contracts

What it means: Rates move with the market rather than being fixed for a set term.

Potential advantages

• Potential to benefit if wholesale prices fall
• Typically shorter or no fixed commitment
• Flexibility

Potential considerations

• Exposure to market increases
• Harder to budget
• Less certainty

Suitable customer profile

Businesses willing to accept some market exposure in exchange for flexibility.

Questions to ask before signing

• How is the variable rate calculated?
• Is there a floor or cap?
• What notice is required to move to a fixed contract?

Deemed contracts

What it means: A default tariff applied when a business takes over a supply without an agreed contract in place, for example when moving into new premises.

Potential advantages

• Supply continues without interruption
• No contract required to start supply

Potential considerations

• Typically a supplier's most expensive tariff
• No price certainty
• Should be replaced with an agreed contract as soon as possible

Suitable customer profile

No one — deemed rates are a fallback, not a recommended choice.

Questions to ask before signing

• What is the deemed rate?
• How quickly can I move to an agreed contract?
• Are there any exit fees?

Out-of-contract rates

What it means: Rates applied when a fixed contract ends without a new one in place. Similar to deemed rates but specifically follows an expired contract.

Potential advantages

• Supply continues while you arrange a new contract

Potential considerations

• Typically far higher than arranged pricing
• Avoidable by planning your renewal
• No budget certainty

Suitable customer profile

No one — out-of-contract rates should be avoided by agreeing your next contract before the current one ends.

Questions to ask before signing

• What is my current contract end date?
• How do I move off out-of-contract rates?
• How quickly can a new contract be arranged?

Flexible procurement

What it means: A strategy for larger users where energy is bought in tranches over time rather than fixed all at once, allowing some responsiveness to market conditions.

Potential advantages

• Ability to respond to market movements
• Can average out pricing over time
• Suited to larger or half-hourly metered users

Potential considerations

• Requires more active management
• Less budget certainty than a fixed contract
• Better suited to higher consumption

Suitable customer profile

Larger businesses with high consumption and the ability to manage a flexible purchasing strategy.

Questions to ask before signing

• How are tranches scheduled?
• What market signals inform purchasing decisions?
• How is performance reported?

Multi-site arrangements

What it means: Coordinating contracts across multiple sites, either consolidating with one supplier or managing a portfolio of separate contracts.

Potential advantages

• Simplified management if consolidated
• Centralised renewal tracking
• Coordinated procurement

Potential considerations

• Consolidation isn't always the lowest cost
• Different sites have different profiles
• Contract alignment takes coordination

Suitable customer profile

Businesses operating across multiple locations.

Questions to ask before signing

• Should I consolidate or keep contracts separate?
• Can contract end dates be aligned?
• How are renewals tracked across sites?

Longer-term contracts

What it means: Contracts fixed for an extended term, often 24 or 36 months, locking in a rate for longer.

Potential advantages

• Extended budget certainty
• Protection from sustained market volatility
• Fewer renewal cycles

Potential considerations

• Less flexibility if the market falls
• Longer commitment
• Early exit may be costly

Suitable customer profile

Businesses prioritising long-term certainty over flexibility.

Questions to ask before signing

• What term lengths are available?
• How does the rate compare across terms?
• What happens at the end of the term?

Not sure which contract is right for you?

The best way to decide is to understand your current position. Request an energy review and our team will help you weigh the options against your business needs. See also our guides to how business energy works and understanding your bill.