‘Energy Tariff Comparison: Fixed vs Flexible’

A guest blog from Adam Holt, Account Director at CLA Energy Services

Confused about Energy Contracts?

There has never been so much discussion about energy as in recent times, with the market full of experts, suppliers, brokers and commentators.

Tariff complexities have added to the general frustration around business energy, with rural business owners left confused and unsure of how to proceed. We’re here to cut through the noise so you can confidently make the right choices for you and your business.

Contract Types

Commercial energy is minefield of varying contract types and terminology that can become confusing. Essentially there are two main contract types, Fixed and Flexible.

Flexible contracts have variable unit rates that can change from one month to the next. Contracts of this type can be beneficial when market conditions are favourable.

The fixed option gives commercial energy users a fully fixed, fully inclusive contract. These contracts vary in length and can range from 1-5 years.

What are the benefits of a fixed contract?

The main benefits of a fixed contract can be summed up into 2 main points; budget certainty and market protection.

Because all associated costs are fixed for the contract duration you can use the previous years consumption to give an accurate indication of what you will pay month on month throughout the full contract term, giving you complete certainty on what the business needs to budget for energy costs.

Again, because the costs are fully fixed, if there are any market movements throughout the contract term businesses are fully protected at the agreed rate and therefore would not be impacted by the volatility/market movements. An issue that has become more apparent over the last 18 months.

What are the benefits of a flex contract?

For many businesses, flexible contracts can often be riskier than fixed. This is due to the need to constantly manage energy purchasing decisions throughout the contract and your actual unit price is unknown. This presents obvious budgeting challenges. In theory, flexible contracts provide the opportunity to take advantage if energy prices fall. Obviously, this is an unknown, as prices aren’t guaranteed to drop and could rise as you need to execute a purchase. Businesses should consider whether they have the expertise, time and appetite for this risk when evaluating this option.

How can CLA Energy Services help?

At CLA Energy Services we have a team of highly experienced energy consultants. We will help you make sense of the market and your options. This will help you make a more informed decision.

Want to know more? Call one of the team on 0808 164 6151 or email us at energyservices@cla.org.uk