Best way to source Business Energy Contracts

1. Understand Your Current Position

Before you start shopping around, you need to know what you’re working with.

• Gather Your Bills: Have at least 12 months of historical energy bills handy. This shows your usage patterns across different seasons.

• Know Your Consumption: Identify your annual consumption in kilowatt-hours (kWh) for both electricity and gas. You also need to know your profile class (for electricity) and LDZ (for gas), which determine network charges.

• Check Your Contract End Date: This is critical. You need to know when your current fix ends and if there is a notice period required to switch without being automatically rolled over.

2. Know Your Contract Types

Energy contracts come in different structures. Choosing the right one depends on your risk appetite and budget.

• Fixed-Price Contract:

  • What it is: You agree on a unit rate for the duration of the contract (usually 1-3 years).

  • Pros: Budget certainty; protection from market price spikes.

  • Cons: If wholesale prices drop, you are locked into a higher rate.

• Flexible / Pass-Through Contract:

  • What it is: You buy your energy in chunks over the contract period, paying the wholesale price at the time of purchase plus supplier margins.

  • Pros: Potential to benefit from market dips; greater control.

  • Cons: No budget certainty; requires active market management or a skilled broker. Typically only viable for very large businesses.

• Deemed / Out-of-Contract Rates:

  • What it is: If you move into a new property without signing a contract or let your contract roll over, you are placed on expensive variable “deemed” rates.

  • Pros: None. It offers convenience but at a very high cost.

  • Cons: Significantly more expensive than negotiated rates.

3. The Procurement Process: To Broker or Not to Broker?

You have two main paths to securing a new contract.

Option A: Using a Broker or Consultant
Most businesses use a broker.

• Pros: They handle the legwork, have access to a wide panel of suppliers (including those you can’t access directly), and can advise on market trends. They help you compare offers.

• Cons: Brokers are paid via commission, which is built into the unit rate.

• Crucial Tip: The supplier contract will show the total commission that will be paid to the broker.

Option B: Going Direct

• Pros: You cut out the middleman, potentially saving on commission.

• Cons: It’s time-consuming. You have to approach suppliers individually, fill out multiple application forms, and you may only have access to the larger, less competitive suppliers.

4. Key Factors That Influence Your Price

When you get quotes, the price isn’t just about the wholesale market. Suppliers price risk based on your specific profile:

• Credit Score: Your business’s credit rating is a major factor. A poor score can lead to higher quotes or demands for large deposits.

• Annual Consumption: Generally, the more you use, the better the rate you can negotiate (economies of scale).

• Payment Method: Paying by Direct Debit is almost always cheaper than receiving a bill and paying later.  Most suppliers insist on Direct Debit payments.

• Billing Options: Opting for online billing (rather than paper) can save a small amount.

5. What to Look for in the Small Print

Don’t just look at the headline unit rate. Examine these contract details:

• Exclusions: Some contracts include “excluded” or “non-commodity” costs in the headline rate; others pass them through as a separate line item. Compare like with like.

• Invoicing and Billing: Is it accurate? Will you get one bill for all sites?

• Contract Length: Are you comfortable with the term? (e.g., you might want a short-term deal if you expect prices to fall).

• Exit Fees: What are the penalties if you want to leave the contract early (e.g., if you close the business or move premises)?

• Rollover Clauses: Does the contract automatically renew? If so, what is the notice period required to opt-out? (This is often missed!).

6. Timing the Market

• Don’t Leave it Too Late: Start the renewal process 3 to 6 months before your contract ends. This gives you time to negotiate and ensures you don’t fall onto expensive out-of-contract rates.

• Market Volatility: Energy markets are volatile. If a broker offers you a price that looks good, it might be worth securing it rather than waiting, as prices can change by the hour.

Summary Checklist

1. Prep: Find your usage data and contract end date.

2. Decide: Choose a broker or go direct.

3. Shop: Get at least 3-5 quotes for comparison.

4. Scrutinize: Compare the total annual cost, not just the unit rate, and check the T&Cs for exit fees and rollover terms.

5. Sign: Ensure the contract details (dates, price, consumption) are correct before signing.