Understanding Different Energy Contracts

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There are a number of business electricity and gas contracts on the market. The electricity and gas contracts available to your business will depend upon your business size and energy spend.


Every business has its own distinct energy requirements, so it is important to choose supply contracts that suit your needs. Choosing the right energy contract requires a careful assessment of a number of factors including the following:

  • The amount of energy you use
  • When you use it
  • The meter type or the infrastructure that you have
  • Your overall business strategy and planning
  • The appetite of your business for or adversity to risk
  • Your business’ commitment to the environmental standards

With the large number of electricity and gas contract options available these days for businesses, understanding what each of them mean and whether they are right for your energy requirements is crucial. Here are the most common types of energy contracts:

  • Flexible energy contracts: These are the energy supply agreements for electricity or gas where you can purchase energy in increments, at times to suit you during the contract period. This method allows you to manage your own risk with the potential to take advantage of the beneficial market movements. Throughout the entire contract, you are in control and your buying patterns can be devised to reflect your business strategy and performance. For instance, over a two year contract, purchases can be made on a monthly, quarterly, by season basis or using a combination of all three. Usually, this type of contract would be suitable for the customers who use large amounts of energy or where energy cost is a big overhead.
  • Fixed energy contracts: This contract simply means that your prices are fixed at the start for an agreed contract term. The prices will normally reflect the market at the time of committing to the contract and will remain the same for the entire fixed supply period, despite of any market volatility during that period. Your prices are secured for a fixed period up to 4 years because your anticipated energy use is purchased up front for your entire contract, at the market prices on the day you commit to the contract. The benefits of fixed energy contracts include- it provides protection against volatility in energy market conditions, aids in future cost planning and easy to manage, giving you peace of mind.
  • Fixed and Flexible (Combination): With flexible contracts, the consumption baseline is predicted over the supply period. The more consistent your consumption pattern is, the lower the risk is for the remainder of your trading blocks of energy. The combination of fixed and flexible contracts provides a solution between the two differing methods. The utilities can analyse the consumption for all your sites breaking down the consumption into manageable blocks and identifying the components that could be reduced by energy management systems. The data from this analysis can identify the sites where consumption is predictable and the baseline is more constant and put a flexible procurement plan in place.

For more information, you can call on Npower Contact Number and get in touch with its dedicated team.

Preetika is an English major who has been writing since his college days. From education to lifestyle, Preetika loves to write on diverse topics. When not writing, she likes to spend time reading. Fishing and snooker are her other interests.
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