Skip to main content
business energy contract

How to Choose a Business Energy Contract in 2023

| Alex Dovey |

Cutting energy costs is the simplest way to make your business profitable, but it’s easier said than done.

Your business energy contract becomes a deciding factor, and there are more options than just the common fixed or variable energy contracts.

The confusion around a commercial contract can result in selecting the wrong deal which can negatively affect your revenue.

To help, we’ve put together this guide where you will learn:

With proper research, review and analysis, your business will avoid an inefficient deal and be on the right path to keeping your energy costs as low as possible.

What Are The Different Types Of Business Energy Contracts?

There are the following different types of business energy contracts:

Let’s take a closer look at each contract type and their pros and cons.

Fixed Energy Contracts

A fixed energy contract operates under a fixed tariff per kilowatt hour (kWh). They are also known as retail energy contracts. The unit rate and standing charge remain fixed for the entire term, and your bills vary depending on how much electricity and/or gas you use. The contract is hassle-free, competitive, and does not need constant monitoring. You should compare the market of fixed contracts before selecting a supplier.


  • Rising market prices won’t affect you
  • More business energy deals to select from
  • Cheapest type of contract


  • An exit fee if you decide to leave early
  • Automatic rollover at the end of the contract can make it expensive
  • Falling energy prices won’t benefit you

Variable Energy Contracts

These business electricity contracts have a variable rate based on current market activity. If the market price increases, you’ll have to pay more; if the price of electricity drops, you pay less. Calculating bills based on usage is difficult in this case, as the prices keep changing.

This contract benefits businesses that are opposed to risk; falling market prices are good for their fortune. Regardless of the terms and conditions, variable energy contracts need regular monitoring and planning. It’s typical to seek the support of a business energy consultant to manage a variable contract on your behalf.


  • No exit fees
  • No lock-in period; leave when you want
  • Switch contracts whenever you want
  • Save money during low market prices


  • Market prices usually rise more often than they fall
  • Constant monitoring may be difficult
  • Budgeting becomes difficult due to changing bills

Out-Of-Contract Tariff

In cases where your contract ends before you arrange a new one, you will most likely end up with an out-of-contract tariff. out-of-contract rates are higher than a fixed-term contract and are the most expensive. However, despite their cost, they usually have the fairest of contract terms and extra regulatory protections in addition to a 28-day notice period, so you can easily switch to another contract.


  • Easily switch to other contracts
  • No termination fees
  • Extra regulatory protections


  • Expense

Flex-Approach Contract

If your business is of a significant size you may want to consider purchasing energy in bulk ahead of time.

With a flex approach contract aka flexible energy contract, you can capitalize on advantageous wholesale rates by procuring energy in advance for future months or years, typically during low costs periods.

This gives you clarity on the cost you will incur when you consume that energy supply.

How does it work?

Flex approach contracts work by paying a partial sum of the contract, and the market rate decides the remaining sum. Typically, you fix the non-commodity charge and then buy the actual commodity element. For example, say we buy a customer electricity today at a hypothetical current market price of 15p per kWh; the commodity cost is 15p. But the non-commodity typically adds 12-15p extra onto the cost, so they pay 27-30p per kWh with everything included.

However, there are risks, as you may have already purchased energy at a rate that could be higher than future rates if they continue to drop or if you are caught out of contract when energy prices are much higher.


  • Cost-effective
  • Some degree of planning your energy costs at the fixed amount you bought in bulk


  • Requires continuous monitoring and advanced knowledge about market trends
  • Higher degree of risk

Deemed Energy Contract

Deemed contracts are similar to out-of-contract tariffs with 28 days’ notice. Although, the difference is that they are provided by business energy suppliers when you move to a new premise and don’t have a contract in place yet. Suppliers aim to extract as much money as possible from you through a deemed contract. Therefore, if you wish to save money, we advise finding a new energy supplier/ business contract as soon as possible.


  • Easily switch to other contracts
  • No termination fees
  • Extra regulatory protections


  • Expensive

Evergreen Contracts

Evergreen contracts (also known as roll-over energy contracts) are contracts where once their term ends, the contract automatically rolls into a new contract for another year. Unfortunately, the new contract can have higher fees, but the current supplier may offer you blend and extend terms to try and retain your business.


  • Easily sorted payments as staying with the same provider.
  • Hassle-free as not looking for a new provider.


  • Business energy prices are usually higher than the previous year.
  • Termination fees for leaving the contract early.

Blend and Extend Tariffs

This type of contract allows you to extend your current business energy contract with your supplier. Consequently, your business energy supplier may reward you with discounted prices for this extension. Blend and extend contracts work best if you’re satisfied with your current supplier; however, they may not be the most competitive rates.


  • Royalties or discounts on your current plan
  • Easily sorted payment as staying with the same provider
  • Hassle-free as not looking for a new provider


  • Missing out on contracts with cheaper rates
  • Risk of increasing contract length at an uncompetitive market rate

What Affects Business Energy Contract Rates?

You will see differences in the rates offered by different suppliers and contracts. Both internal and external factors influence these rates. Some of the internal factors include:

  • Current annual energy use
  • Business size
  • Business location
  • Times of the day/night your business uses the most energy

Ensure that as much of the above information is available to an energy supplier or an energy broker. This ensures they have everything they need to try and secure you an accurate and competitive deal.

External factors also influence the rates in business energy contracts such as an increase or decrease in wholesale prices (the amount that energy suppliers pay to energy generators for the energy they purchase to supply businesses). Wholesale prices are further influenced by factors like supply and demand and instability. For example;

  • Conflicts and wars in areas producing energy, affect the supply.
  • Growth in demand from high economic growing countries such as China.

Several factors can influence your business energy contract prices, ranging from fuel, and power plant costs to even distribution costs. An in-depth analysis of these factors is crucial when choosing the best contact.

What are the Average Business Energy Contract Rates in the UK?

Below are comparison tables to estimate the business contract energy rates for UK businesses for electricity and natural gas, respectively (assuming 300 working days).

Average Industrial Electricity Cost:

Business Type

Annual Usage

Unit Price per KwH

Standing Charge

Total Annual Cost (£)


5,000 to 15,000 kWh



1794 – 3414


15,000 to 25,000 kWh   



5085 – 8365


25,000 to 55,000 kWh



8464 – 18394


More than 55,000 kWh



> 17625

Average Industrial Gas Cost:

Business Type

Annual Usage

Unit Price per KwH

Standing Charge

Total Annual Cost (£)


5,000 to 15,000 kWh



680 – 1710


15,000 to 30,000 kWh



1665 – 3165


30,000 to 65,000 kWh



3147 – 6612


More than 65,000 kWh



> 6440

Business Energy vs. Domestic Energy Contracts

Business energy contracts differ from domestic ones, but what is the difference? Here are some points to help you understand what differentiates business energy and why they differ from the domestic energy contracts homeowners are used to:

Cheaper tariffs

Business energy tariffs are usually cheaper. This is because electricity is bought in bulk in a business energy contract, unlike domestic contracts that run monthly. However, even though business contracts provide a more affordable unit rate, getting out of a commercial contract is more expensive.

Duration Of the Term

Unlike domestic contracts that usually last a year, business energy contracts are decided on an agreed term of up to five years. To shop for a new deal, you must wait for the renewal window between one to six months before the contract’s end date.

Cooling-off Period

A domestic energy contract provides a cooling-off period of about 14 days when you switch to a new contract. However, business energy contracts don’t usually allow a cooling-off period (although it is worth asking if there is one). Therefore, it is crucial to be completely sure before entering a new business energy contract.

Single Fuel Deal

Business energy contracts are signed for one fuel at a time, whereas domestic energy providers can provide you with a dual fuel deal for both gas and electricity. You need to sign different contracts to obtain both fuels for commercial use. Beware that some suppliers may offer a more competitive deal if you take both gas and electricity from them.

Off-the-shelf Solutions

When buying a domestic contract, you can choose from a library of contracts that best fit your needs. However, in a business energy contract, your contract is tailor-made for your needs and, therefore, bespoke; no two contracts are alike, which makes comparing quotes a challenge.

Broker costs

Domestic energy doesn’t usually involve working with an energy broker but business contracts may. If you decide to engage a business energy broker, their fee will be included in the energy rate you pay. Whereas domestic energy tariffs don’t include additional fees if a comparison site is used for example.

If you decide to use an energy broker, it is advisable to request a written copy of the broker agreement and the energy contract offer before accepting it to ensure that you fully understand the terms involved.

Why use an energy broker in the first place?

Working with an energy broker brings advantages, such as the energy rates they can access due to their relationship with suppliers. Also you only have to deal with one point of contact as they manage the collection of quotes on your behalf.

If you decide to use a broker make sure they are justifying their fee and do more than just checking in with you once the contract renews. A good energy broker will also be an energy consultant and should be offering the following value add:

Want more guidance on selecting an energy provider and using a broker? Watch the interview below:

What Should I Consider When Selecting a Business Energy Contract?

Due to the longer contract lengths and lack of cooling-off periods it is crucial to pick the right contract for your company. Here are some key considerations that will help you make an informed decision:

Usage Bandwidths

Bandwidth is defined as the maximum usage with a given term. Knowing your bandwidth helps you predict your monthly final bill and budget accordingly. Therefore, you must buy a contract covering your usage to avoid getting a higher energy bill than expected. This is achieved by performing an energy audit and reviewing your annual consumption.

Long-Term Commitments

As business energy contracts operate on a long-term basis you have to be extremely careful on what you agree with a supplier. An inefficient long-term commitment can be costly as you might not be able to switch for a considerable amount of time, or will have to pay a penalty to access better deals as the market changes.

Remember to consider your existing sites and their situations. For example, it’s advisable to try and get a contract length that aligns with the length of your site leases. This is because you don’t want to sign a long-term deal if your lease expires and cannot renew, and therefore would have to move site which will have different energy requirements and you would potentially be consuming different amounts to what your capacity in the contract stipulates.

Calculate your Energy Consumption

By taking regular meter readings and producing an energy report you obtain more precise information on your energy consumption. Knowing the amount you use will help to negotiate when receiving quotes from suppliers

Capacity Scheduling

Capacity scheduling is essential for maintaining an adequate supply of electricity for your sites when demand is high and you need to consume more energy than your averages, such as peak usage in high demand periods. Striking a balance between ensuring availability when required and avoiding excessive costs is vital. In situations where electricity demand is low, having an excessive capacity could result in increased expenses. Therefore, understanding your peaks and troughs and working with suppliers so your contract can be tailored to this is important.

Material Changes

Be mindful of the material changes to your business and sites.  These are typically equipment, personnel, new business premises, etc. The reason why you need to consider these changes is that any increase or decrease in the above will have an impact on your energy consumption and this impact may not reflect what was agreed in the capacity of your energy contract. Depending on your contract, a significant change in consumption can result in a change in energy price. Check the flexibility of the contract and how much volume can be added or removed before a price change is incurred. Therefore, consider the future and if you expect any consumption changes as planning these changes will save you from unexpected hidden expenses.

Pro tip – understand your take and pay clause

Every business energy contract will have a take and pay clause. This is a minimum percentage of volume you think you’re going to use and a maximum. More and more businesses are seeing a significant reduction in consumption, especially since the COVID-19 pandemic and the trend in hybrid working as increased employees work from home.

If your consumption is significantly less than you agreed you may be able to recoup some of your energy costs.

Understand the Termination Fees

You should always consider different termination fees offered in various contracts. These fees are often a percentage sum of the total annual cost or a flat fee. Choosing a contract with a low termination fee is usually the best choice. It may be that some competitive contracts have higher termination fees as that cheaper rate is based on a very limited amount of capacity. All these little factors have to be carefully reviewed when making a choice.

Hidden Fees and Contract Language

Even if the contract seems lucrative at first, ensure that there are no hidden fees. Check the contract language and re-read your current contract to see what you’ve already agreed. Then you can compare it to the contract language of your prospective contracts.

Pro tip – check you if supplier could amend any contractual terms

Ensure you are protected and understand if the contract can be amended after signature. If so ask yourself if it is still beneficial to stay with them.

If you’re not careful, hidden fees will cost you a lot of extra money, and you’ll end up paying way over your budget.


The sooner you act, the more time you have before your existing contract expires, and the better the deal you’ll find. As soon as you see a good tariff, it is vital to inquire about switching to have a plan in place for when your existing contract expires. Waiting until the last day of your plan’s term might result in higher market prices or increases in supplier rates. This is due to not giving yourself enough time and therefore being in greater demand for a new deal, causing you to miss out on a favourable offer. Additionally, delaying the switch could lead your current utility supplier to enrol you in a rollover contract, which may not be as advantageous.

Understanding your needs

When considering what energy contract to take it is important to establish your requirements. Do you prefer stability and predictability with a fixed-term agreement? Are you willing to take a risk with a reduced price but on a variable deal? or are you looking to switch to environmentally friendly suppliers to enhance your business’s green credentials? Having a clear understanding of your preferences will help you identify which contract to select.

In-House or Outsource

Deciding if you want to procure your energy using your own in-house resource or if you want to outsource your energy procurement is important. This will determine the amount of time you wish to dedicate to selecting an energy contract.

Using an energy broker will take the stress and time out of finding the best deal as you deal with one single point of contact instead of multiple suppliers and also gain access to different supplier rates due to their relationships in the energy market. On top of this , brokerage firms are business energy consultants that will help you understand your energy management and offer invaluable advice when selecting a deal.

Relationship with Existing Supplier

Consider the relationship you currently have with your existing supplier. Are you happy with their level of service? Have they been flexible and accommodating to your needs? Energy companies are eager to retain customers, and you may be able to negotiate a favourable deal with your commitment to staying longer if you are happy with your current service and relationship.

Market Conditions

In a volatile and ever-evolving energy market, this can influence a business energy contract dramatically. The rate at which the market is changing will create another factor in terms of how flexible your contract is in relation to marketplace changes. For example, a more expensive rate might be a better deal if you are fixed on it and know that market prices will soon supersede this in the future and give you a saving. Or perhaps you are expecting the market prices to drop, and therefore a variable contract could be the best choice.

How To Get The Best Business Energy Contract Rates?

If you’re looking for the best contract deals for your business, Professional Energy Services can help.

Our team of energy brokers and consultants can advise on the best possible deal based on your current and predicted usage, and attitude to risk.

All you need to do is provide us with some basic info and we can start procuring a deal on your behalf. We’ll use your details to find an energy provider that’s the best fit for you as our experts guide you on the different deals available to you.

Frequently Asked Questions

You now know about commercial business energy contracts and what to consider before buying one. Let’s look at some of the most frequently asked questions regarding them:

How do business energy contracts work?

This contract is a legal agreement between a business and an energy supplier. The supplier provides energy, either electricity or gas in a single contract (sometimes dual fuel is available), and the signee pays for these services. The rates for these contracts are decided by several factors, including; energy usage, size, location, fuel prices, etc.

How long are business energy contracts?

Commercial contracts are long-term plans compared to domestic contracts. They last between one to five years. You are tied in the contract and cannot switch suppliers or to a different contract until the renewal window opens.

What happens when your business energy contract ends?
Two scenarios may take place once you complete your contract term. First, your supplier might contact you for a rollover contract where you enter another contract for a given period of time at a fixed rate per kWh. The other option can be a variable electricity contract where you will pay your supplier per changing energy market price trends.
Can i get out of a business energy contract?

Not until it expires. Most business energy contracts lack a cooling-off period, which allows for the cancellation of a contract within a specified number of days after its agreement. Therefore, it is essential to thoroughly review any contract before you agree to it.

How do i get out of a business energy contract?

Business electricity contracts are typically associated with an official end date, and your agreement will specify a notice window toward the end of the contract. Be aware of these details, as you will need to submit a termination letter within the designated window to ensure that your contract is effectively concluded on the specified end date. 

What happens to my business energy contract if i move premises?

You need to notify your supplier about your new address as your current deal doesn’t automatically transfer over to the new address. When you move into a new premise you’ll be transferred onto a ‘deemed rate’ if you were out of contract with the building’s current suppliers.

Should i renew my business energy contract now?

Before you renew your current business energy contract check the market to see if any better deals are available. When a contract ends, you are automatically put onto a ‘deemed rate’ tariff where you pay much higher than you previously were. To prevent this you should either renew your contract as early as possible or search for a new supplier before your existing contract ends. 

Related Posts

blend and extend energy contract

A Guide to Blend and Extend Energy Contracts

| Alex Dovey |
What is a Blend and Extend Energy Contract? A Blend and Extend contract is a type of business energy contract that allows you to extend your curren…
take or pay clause energy contract

Take or Pay Clause in Energy Contracts

| Alex Dovey |
What is a take or pay clause in an energy contract? If you haven’t heard the term before, the short and sweet explanation is that a take-or-pay cla…
cooling off period for business energy contracts

Cooling-Off Period for Business Energy Contracts – FAQ

| Alex Dovey |
Navigating the world of business energy contracts can be a daunting task. Understanding all your options and making informed decisions can save you…