Which type of energy contract is right for your business?

Fixed. Variable. Pass-through. No standing charge. Blend and extend. On paper, they all sound reasonable but in practice, it’s hard to know what any of them actually mean for your business.

It’s not always clear which one fits best, or what the trade-offs really are.
You might be offered several options by a supplier, broker or consultant but if no one explains them properly, how are you supposed to compare? It’s easy to end up defaulting to what feels familiar, or what’s cheapest at a glance, without knowing what you’re signing up for.

Here’s a quick guide to the main types of business energy contracts: what they are, why they matter, and how to know which one might suit you best.

Fixed-rate contracts

A fixed-rate contract means your price per unit, and usually your standing charge, is locked in for the duration of the agreement. That might be one, two or even three years.

The benefit? You know what you’re paying, which makes budgeting simple. It protects you from sudden price spikes and takes the guesswork out of forecasting.

But it works both ways. If market prices fall during your contract, you won’t benefit, you’ll still pay the rate you agreed to upfront.

Good for: Predictable costs, peace of mind
Be aware: You might miss out on savings if the market drops

Flexible energy contracts

A flexible energy contract moves with the market. If wholesale prices fall, your bills come down. But if they rise, so do your costs.

It’s a higher risk, higher reward setup. You’re exposed to volatility, but you might save money during quieter periods.

Good for: Flexibility and short-term opportunities
Be aware: Budgeting gets tricky, and prices can jump unexpectedly

Pass-through contracts

In a pass-through contract, you agree a rate for the energy itself, but other charges (like transmission, distribution and policy costs) are passed on at cost.

It’s a more transparent structure, often used by larger businesses that want a clear breakdown of every charge.

But while your energy rate stays the same, your total bill might not. That’s because third party costs can change throughout the year.

Good for: Larger or multi-site businesses that want more visibility
Be aware: Monthly costs may still vary, and admin can be heavier

No standing charge contracts

This type of contract removes the daily fixed fee you’d normally pay, but offsets that with a higher unit rate.

It only really makes sense for businesses with very low or irregular usage. For most businesses, the maths doesn’t work out.

Good for: Low usage or seasonal businesses (e.g. holiday lets)
Be aware: If your usage picks up, this will likely cost you more

Renewable contracts

Renewable or green energy contracts guarantee your supply is backed by certified green generation (usually wind, solar or hydro).

This isn’t just about doing the right thing. More and more customers, investors and supply chains expect businesses to take sustainability seriously. Signing up to a renewable contract is a small but visible step.

Good for: Businesses with sustainability goals or reporting requirements
Be aware: Slightly higher rates, depending on supplier

Blend and extend

This is an option some suppliers offer mid-contract. You blend your current rate with a new (usually cheaper) one, in exchange for extending the contract length.

It can be a smart way to reduce costs without fully re-contracting, but only if the timing is right.

Good for: Businesses in long term fixed contracts looking for relief
Be aware: You’re locking in again, so think ahead before signing

Which one is right for you?

That depends on three things:

1. How much control you want over your costs
2. How much time and energy you can give to managing it
3. What matters most: predictability, savings, sustainability or simplicity

We speak to people who’ve chosen a fixed contract just for peace of mind. Others want to chase savings on a variable setup because they’ve got someone in-house to manage it. Some are driven by environmental targets. Others just want to stop overpaying.

There’s no single right answer. But there is a right fit for your business, based on how you work, what you use, and what you care about.

Worried you’ve picked the wrong one? Or just want a second opinion?

We get it. Most businesses sign contracts and hope for the best. But understanding your options gives you the chance to take control, not just on price, but on everything from budgeting to sustainability.

At Troo, we help you make sense of the energy market. We explain your options clearly and calmly, based on how your business actually operates.

Request your free no-obligation energy health check