As a business owner, understanding the different types of business energy contracts available to you is essential to making sure that your company is as cost-efficient and sustainable as possible. Knowing your options can help you choose the best plan for your business needs, ensuring that you are getting value for money and achieving long-term sustainability goals.

In this guide, we'll explore the various kinds of energy contracts available on the market today and why they might be a good option for businesses looking to become more energy-efficient. Read on to learn everything you need to know to confidently make the right choice for you and your business!  

Variable Energy Contracts  

Variable energy contracts are agreements between energy suppliers and consumers where the rate charged for energy varies based on market prices. These contracts allow consumers to take advantage of lower prices when they decrease but require them to pay more when prices increase.  

The highlights:

  • Flexibility allowing consumers to adapt energy usage based on the current price  
  • Take advantage of lower prices and save money on bills  
  • Can switch to a fixed contract if energy prices start to rise  

The challenges:

  • Fluctuations in energy prices can make it difficult to budget  
  • If market prices remain high for an extended period, the price of a variable contract could exceed that of a fixed contract  

Fixed Energy Contracts  

The most common type of energy contract, a fixed business energy contract is when the energy supplier and the consumer agree to a set price for a predetermined period, typically between one and five years.

The highlights:

  • Offers stability and predictability  
  • You know how much you will pay regardless of market fluctuations  
  • Improved financial security and protection from market spikes  

The challenges:  

  • May end up paying more if prices drop significantly
  • May incur early termination fees if consumer decides to switch suppliers  
  • Less flexibility  

Rollover Energy Contracts  

Rollover contracts – also known as Evergreen contracts - are a type of energy contract that automatically renews on a periodic basis, usually every year or every few years, unless either party provides notice of termination. These contracts are usually offered by energy suppliers to customers who are looking for a long-term energy solution with a stable price.

The highlights:

  • Added convenience and stability
  • Beneficial if happy with supplier and want to continue working with them without renegotiating a contract

The challenges:

  • Might end up paying more for energy than they would on a fixed-rate deal  
  • May start feeling stuck in the contract  

28-Day Energy Contracts  

28-day energy contracts are contracts that typically last for 28 days, during which time the energy supplier can increase or decrease the price of energy at any point.

The highlights:

  • Free to switch suppliers or change contract type at any time without penalty
  • Take advantage of any drops in energy prices that occur during the term of the contract

The challenges:

  • Lack of price stability, could potentially face large price spikes  
  • Monthly need to monitor and switch contracts can be time-consuming and confusing

Deemed Energy Contract

Deemed contracts are a type of energy contract that comes into play when a business moves into new premises without agreeing to an energy contract with a supplier. When this happens, the existing supplier of the previous tenant will continue to provide energy to the new tenant on a deemed contract.  

The highlights:

  • Flexibility for businesses moving into new premises or those with short term energy requirements
  • Continuous energy supply without disruption  

The challenges:  

  • Energy rates tend to be higher than standard contracts which can result in higher bills
  • Often subject to lengthy notice periods for termination which can make it more difficult to switch to a cheaper contract

5 Tips on Choosing the Best Energy Contract for Your Business

1. Research the different energy suppliers in your area  

It's important to research the different energy suppliers in your area to find the best option for your needs and explore business energy comparison. Start by looking for a list of energy companies that supply to your location. This can usually be found on your local government website or by doing a quick online search.  

Reading customer reviews can also provide valuable insights into the quality of service offered by an energy supplier. Look for feedback on factors such as billing accuracy, customer service, and response times to complaints.

2. Compare the different contracts available  

Carefully comparing the different options available to ensure that you find one that suits your needs and budget is crucial to choosing the best energy contract. This is because different contracts come with different features, rates, and terms, which can have a significant impact on your energy costs and overall satisfaction with the service.

3. Consider the length of the contact  

When it comes to choosing an energy contract, length is a crucial factor that can have a significant impact on your finances and the flexibility of your energy usage. The length is an essential factor to consider because it affects the terms and conditions of the deal, as well as the rates charged.

Longer contracts may have attractive discounts, but they can also leave you locked in for years. Short-term contracts offer more flexibility as they allow businesses to adjust their energy usage and switch to other providers with better rates, without incurring hefty penalties.

4. Be aware of any hidden costs or additional fees  

Sometimes contracts come with fees that are not readily apparent or advertised, and these fees can add up to significant costs over the duration of the contract. There may be fees associated with early termination or cancellation of the contract that could end up costing you thousands of pounds.  

Ensuring you know about any hidden costs or additional fees can allow you to factor them into your budget and not get caught off guard.  

5. Talk to an energy expert  

If you're not sure about any part of the process or need more advice on which contract is best for your business, an experienced energy advisor can help you make an informed decision and understand the different choices available.  

An energy expert can provide valuable advice on issues such as pricing structure, billing cycles, cancellation policies, renewable or green electricity options, and more. A business energy broker can also act as the middleman between you and the energy supplier, organising everything on your behalf.  

In Summary...  

Understanding the different types of energy contracts and the advantages and disadvantages of each type is essential for deciding which contract will be best suited to your business. There are a variety of energy contracts available in the market, from variable contracts to 28-day contracts to deemed contracts, so you should do your research carefully before making a decision. By balancing all the pros and cons of each energy contract, you can find the best business energy deals for your business.

Compare and save to find out how you can save up to 60% on your utility bills today with Save on Bills!

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