Last updated: 16 October 2026
Most UK business energy contracts fall into one of two families: fixed, where your price is agreed up front for the term, or flexible, where energy is bought in stages over time. Fixed deals suit businesses that want a known budget, while flexible purchasing suits larger users with the time, data and risk appetite to manage market exposure. This guide explains each type of contract, who it suits, how long contracts run and what to check before you sign in a market that has risen sharply this autumn.
What types of business energy contracts are there?
There are five main arrangements you are likely to meet: fully fixed, fixed with pass-through, flexible, out-of-contract or deemed, and rollover. The first three are contracts you choose, while the last two are what happens when you do not act.
- Fully fixed: the wholesale energy price and the non-commodity charges are set for the term, so your unit rate and standing charge should not change.
- Fixed with pass-through: the wholesale energy price is fixed, but some or all non-commodity costs, such as network charges and levies, are passed through at the actual rate.
- Flexible (also called basket or tranche purchasing): your volume is bought in portions at different times, so the final price is an average of several purchases.
- Out-of-contract or deemed: the rates you pay when a contract ends without a new one in place, or when you move into premises without agreeing a contract.
- Rollover: a new fixed term that some contracts start automatically if you do not renew or give notice in time.
SEFE Energy explains that a bill is made up of the wholesale cost plus transportation charges, regulatory levies and other third party costs. The difference between contract types is mostly about which of those parts are locked in and which can move.
What is a fixed price energy contract for a business?
A fixed price contract locks in your rates for an agreed period, so you know what you will pay per kWh and per day. It is the simplest way to buy energy and the most common choice for small and medium sized firms.
SmartestEnergy describes its fixed product as securing a known rate for the wholesale portion of your bill, with terms of 1 to 5 years. It says fixed suits businesses that want budget certainty, a single transaction, consistent energy use and protection if they expect wholesale prices to rise.
The catch is that “fixed” does not always mean every line on the bill is fixed. SEFE warns that not all “fixed” contracts are the same and that some pass-through deals are marketed as fully fixed.
What is a pass-through contract?
A pass-through contract fixes the price of the energy itself but charges some non-commodity costs at whatever they turn out to be. If network charges or levies rise during your term, your bill rises with them.
SmartestEnergy lets fixed customers choose whether non-commodity costs are fixed at a known rate or passed through at actual cost. A pass-through quote can look cheaper at the start because the supplier is not pricing in the risk of those costs going up, but you carry that risk instead.
What is a flexible energy contract?
A flexible energy contract lets you buy your energy in portions, called tranches, over a period rather than all at once. Each purchase is priced at the market rate on the day it is made, so you are not committing all your volume at a single price.
SmartestEnergy says its flexible customers trade their volume in tranches to spread the risk, buying on a monthly, quarterly or seasonal basis and acting on favourable market moves. It notes that a three year term is standard for its flexible contracts.
NGP describes a similar approach in which its trading team buys near-term energy in stages and prices each purchase separately, while locking in later years where forward prices are lower. Bear in mind that NGP and SmartestEnergy both sell flexible products, so their pages describe the benefits from a supplier’s point of view.
Fixed vs flexible energy contracts: who does each suit?
Fixed contracts generally suit smaller businesses and anyone who needs a predictable bill. Flexible purchasing generally suits large, energy intensive or multi-site organisations with someone in house, or a broker, to manage buying decisions.
SmartestEnergy says flexible buying fits businesses with in-house energy management or a consultant who can make hedging decisions and forecast consumption. It points to a large single site with a higher appetite for risk, or a multi-site company run by a central energy team.
For context, SmartestEnergy defines large business customers as those using more than 300,000 kWh a year or spending more than £50k a year. Ofgem defines a microbusiness as one using under 100,000 kWh of electricity or under 293,000 kWh of gas a year, or with fewer than 10 employees and turnover up to about €2 million.
Pros and cons of each contract type
| Contract type | Pros | Cons | Typically suits |
|---|---|---|---|
| Fully fixed | Known unit rate and standing charge for the term; simple to budget; one buying decision | You cannot benefit if prices fall after you sign; may price in a risk premium | Small and medium firms, single sites, tight budgets |
| Fixed with pass-through | Energy price fixed; may look cheaper at the start; you pay actual non-commodity costs | Bills can rise if network charges or levies increase; harder to forecast | Larger firms comfortable with some movement |
| Flexible (tranche or basket) | Spreads purchases over time; can buy on dips; can lock in cheaper later years | Final price unknown until all volume is bought; needs time, data and risk appetite | Large single sites, multi-site groups, energy intensive users |
| Out-of-contract or deemed | Supply continues without a gap | Rates typically considerably higher than contracted prices, per SEFE | Nobody by choice; a short term fallback only |
| Rollover | No break in supply | You may be locked into a new term at rates you did not compare | Nobody by choice; check your notice window |
How long do business energy contracts last?
Most business energy contracts run for 1 to 5 years. SmartestEnergy offers fixed terms across that 1 to 5 year range, while its flexible contracts usually run for three years.
Length matters a lot this autumn because near-term energy is the most expensive part of the curve. NGP reported that, for contracts starting in November 2026 at end of September prices, a 36 month fixed contract would average around 27% less than a 12 month deal on gas and around 23% less on power.
On the same basis, NGP said a 24 month contract would come in around 16% lower on gas and 15% lower on power. These are figures from NGP’s own trading desk, so your quotes will differ, but they show why it pays to compare more than one term.
What happens at the end of a business energy contract?
When a contract ends, you either agree a new one, switch supplier, or move onto out-of-contract or rollover terms. The window to act is before the end date, and your contract will set out the notice you need to give.
SEFE advises that businesses should avoid out-of-contract rates, which are typically considerably higher than contracted prices, and should speak to their supplier or third party intermediary early. Check your terms for any rollover clause, the date by which you must give notice and how notice must be sent.
Our business energy contract renewal guide explains how to plan the timing, and our guide on how to switch business energy supplier covers the steps if you decide to move.
What is happening in the energy market in October 2026?
Prices have risen sharply in recent months, which makes the fixed vs flexible choice more important than usual. SEFE says its market observations show October renewal costs up around 30% to 45% compared with a few weeks earlier, and it cites Cornwall Insight research finding energy bills have climbed 25% since February 2026.
NGP’s latest weekly update, covering the week to 2 October, reported that day ahead power rose 16.76% to 15.19p/kWh. It also said Winter 28 gas was 3.19p/kWh, about half the 6.38p/kWh for Q1 2027 gas, and Winter 28 power was 8.27p/kWh, just over half the 15.45p/kWh for Q1 2027 power.
The main pressures NGP highlights are tension around the Strait of Hormuz, extended force majeure notices on Qatari LNG and low gas storage in parts of Europe. Norwegian supply returning from maintenance on 1 October only partly offset the upward pressure.
Should you wait for prices to fall?
Both SEFE and NGP caution against holding out. SEFE says waiting for prices to fall can lead to higher costs, with winter weather, global supply and demand and geopolitics all still in play.
NGP goes further, arguing that delay amounts to unhedged speculation and that prices may settle at a higher level rather than fall back. Nobody can reliably time the market, so ask how much price risk your business can carry. For what sits inside a unit rate now, see our guide to business electricity prices per kWh.
What should you check before signing a fixed price contract?
Check that the contract is fixed in the way you expect, not just on the wholesale part. SEFE’s five point checklist is a practical test for any fixed price energy contract:
- Non-commodity charges: are all of them included in the fixed price?
- New charges: are newer costs such as Nuclear RAB and revised TNUoS built in?
- Pass-through clauses: is there any wording that lets the supplier pass costs through later?
- Unit rate and standing charge: are both fixed, or only one?
- Clear marketing: is the contract described accurately as fully fixed or partly pass-through?
SEFE also notes that even on fully fixed deals, government levies and taxes can still change. Beyond that list, check the contract length and start date, notice and rollover terms, payment and credit terms, and the broker fee.
Ofgem requires suppliers to show broker fees clearly in the principal terms of all non-domestic contracts signed from 1 October 2024. You are entitled to know what your broker earns.
How does a broker help you choose between fixed and flexible?
A broker compares quotes from several suppliers on the same basis, explains what is fixed and what is passed through, and handles the paperwork. For larger users, a broker can also help decide whether flexible purchasing is worth the extra management.
At Utility Market Watch we compare business electricity and business gas from a panel of suppliers, including fixed and pass-through options and different term lengths. We set the quotes side by side so you can see the annual cost, the contract terms and how our commission is built into the unit rate before you decide.
Frequently asked questions
What is the difference between fixed and flexible business energy contracts?
A fixed contract sets your price for the whole term at the point you sign. A flexible contract buys your energy in portions over time, so your final price is an average of several purchases and is not known in advance.
Are fixed price energy contracts for businesses really fixed?
Not always. SEFE warns that some pass-through contracts are marketed as fully fixed, and even fully fixed deals can change if government levies or taxes change.
Is a flexible energy contract suitable for a small business?
Usually not. SmartestEnergy says flexible buying suits businesses with in-house energy management or a consultant who can make hedging decisions, which tends to mean large or multi-site users.
Is a pass-through contract cheaper than fully fixed?
It can look cheaper at the start because the supplier is not pricing in the risk of non-commodity costs rising. You take on that risk, so your bills can increase during the term.
How long should a business energy contract be?
Terms usually run from 1 to 5 years. NGP reported that, at end of September prices, a 36 month fix was around 27% cheaper on gas than a 12 month deal, though the right length depends on your plans and your quotes.
What happens if my business energy contract ends and I do nothing?
You may move onto out-of-contract rates or roll onto a new term, depending on your contract. SEFE says out-of-contract rates are typically considerably higher than contracted prices.
Why are business energy renewal prices so high this October?
Wholesale gas and power prices have risen in recent months. SEFE reports October renewal costs up around 30% to 45% compared with a few weeks earlier, citing tighter supply, geopolitics and winter risk.
Get a quote
Utility Market Watch can compare fixed, pass-through and longer term business energy contracts from a panel of suppliers and explain each one in plain terms. Request a quote, call 03333 601010 (Monday to Friday, 9am to 5pm) or contact us. Our service is paid for by the supplier through a commission included in your unit rate, and as prices change daily we cannot guarantee any quote is the cheapest.