A three-year fixed business energy contract can provide useful budget certainty, but it is not automatically the right choice for every organisation.
With a fixed contract, the agreed unit rates and standing charges remain fixed for the contract period, which protects the business from increases in those charges if wholesale market conditions worsen. The trade-off is that the business is also committed to the agreed price if market prices subsequently fall, and leaving the contract early may be difficult or expensive.
The decision should therefore consider more than the headline rate. Compare the price available for one-, two- and three-year contracts, how much certainty the business needs for budgeting, its expected future energy consumption and the termination conditions attached to each option.
Some organisations place a high value on predictable costs and may prefer a longer fix. Others may prefer a shorter contract so that they can return to the market sooner. The appropriate term depends on the organisation’s objectives and attitude to price risk rather than a general rule that three years is always better.
