How to choose the right business electricity contract

Choosing a business electricity contract isn’t as simple as finding the lowest price and signing on the dotted line.

A great contract for one business may include unsuitable terms for yours.

The right deal depends on how much energy you use, when you use it, how much risk you’re comfortable taking and what matters most to your business.

Get that decision wrong and you could end up paying more than you need to or locked into a contract that doesn’t suit your needs.

What should you look for?

This guide will explain the main types of business electricity contract, the key things to check before signing and common mistakes to avoid.

In this article:

• Learn what makes a business electricity contract the right one for your business.
• Understand the different types of contracts available to you.
• Discover practical checks you should make before signing a contract.

What makes a business electricity contract right for you?

Every business is different. Each organisation has different levels of consumption, usage patterns, risk appetites, priorities and levels of internal expertise.

That means there is no such thing as a one-size-fits-all contract. You must find the right deal to suit your specific business.

The ‘right’ contract is one that aligns with your business needs.

For example, if you want budget certainty above all else, fixing your deal may be a good option.

If your business can tolerate greater price uncertainty and has the expertise to manage purchasing decisions, a flexible contract may be worth considering.

Let your business needs and capabilities guide your contract decision, not the other way around.

What types of business electricity contract are available?

There are two predominant types of business electricity contracts:

Fixed-rate contracts

Fixed-rate contracts typically fix the agreed unit rate per kilowatt-hour (kWh) for the duration of the contract, although other charges may still change depending on the contract terms.

This can provide greater budget certainty but means businesses could miss out if energy unit prices move lower than the contracted rates.

Who are they for? Businesses that prioritise greater budget certainty.

Flexible-rate contracts

Flexible contracts can allow businesses to purchase wholesale energy in stages, at different times during the contract.

This can provide more control over purchasing decisions but also brings exposure to market movements and may require active management.

Who are they for? Businesses that prioritise cost savings with a higher risk appetite and internal expertise for active management.

Bespoke and other contract types

Bespoke contracts may also be available to your business.

Some contracts, including multi-purchase contracts, can fix certain parts of your bill, such as wholesale energy, and others, including network costs, could remain flexible.

Six things to check before choosing a contract

Once you understand your business needs, consumption and priorities, you can begin searching for a new contract.

1. Unit rate: Does the unit rate suit your usage? Energy-intensive users are likely to prioritise this rate.
2. Standing charge: Is the standing charge competitive? This is a fixed fee paid every day regardless of usage.
3. Contract length: Are you comfortable with the term length? Longer contracts can offer greater price certainty, but they also mean committing to a supplier and pricing structure for longer, which can reduce flexibility if rates fall.
4. Termination fees and other charges: What are the termination fees and other charges associated with the contract? Know where you stand before you enter the contract.
5. Additional supplier services: Does your supplier offer additional services such as account management, consumption monitoring or energy-efficiency support? Consider whether these add genuine value for your business.
6. Renewable options: Does the contract offer renewable electricity or products that support your sustainability objectives? Consider whether this aligns with your business priorities and reporting requirements.

Of course, this list is not exhaustive. Make sure you understand precisely what you’re signing up to before you sign a contract.

Mistakes to avoid when choosing a contract

• Choosing a contract solely on price: It’s tempting to leap for the lowest figure, but is that price fixed or could it leap up next month?
• Automatically renewing with your current supplier: Don’t assume you’re getting the most competitive rate if you renew. Shop around.
• Not looking beyond headline rates: That particularly low standing charge may look appealing but compare it with the unit rate and your expected consumption to understand the overall cost.
• Leaving procurement until the last minute: Start early to give yourself time to compare options and avoid the risk of moving onto less favourable out-of-contract rates.
• Choosing a contract that doesn't fit your future needs: A contract that works for your business today may not be suitable if you're planning to expand.

Top tip: If you’re an energy-intensive organisation, it’s likely you will benefit from a more competitive unit rate, at the cost of a slightly higher standing charge.

The right business electricity contract isn't necessarily the one with the lowest unit rate. It’s the one that fits your usage, risk appetite and plans.

How brokers can help

An energy broker can act as an intermediary between your business and energy suppliers.

First, a broker should help businesses understand their energy consumption profile and current market conditions.

Brokers should present a range of options to prospective customers and explain contracts without rushing or pressuring businesses into deals they don’t understand.

Once a contract has been agreed, brokers should work to implement the switch (or renewal) and provide ongoing support to ensure a smooth transition.

Five benefits of using an energy broker

1. Save time: Brokers handle research and supplier conversations.
2. Market knowledge: They make sense of complicated energy markets.
3. More choice: Potential access to multiple suppliers and contract options.
4. Negotiation: Experienced brokers may be able to negotiate commercial terms with suppliers on your behalf.
5. Support: Depending on the service, brokers can help with administration, supplier communication and ongoing account management.

How we can help

Business electricity is complex. We get it. We can support you.

Troo exists to help businesses make sense of their energy needs. We simplify information and help you make smart decisions that manage costs and lead to real change.

We are not here to sell you a quick fix. We're here to understand what matters to you, offer clear advice, and take ownership of the hard parts, so energy becomes one less thing to worry about.

Book a free energy health check today for practical advice on business electricity, gas and water procurement, renewable consultancy and our ongoing management services.