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During these difficult times of Rising Wholesale Prices, it is important to ensure you are comparing Renewal Prices correctly.

May 16 2022 9:05 AM

Within the Commercial Energy Market there are a number of different agreements, and it is important to ensure during these difficult times, businesses are securing the right one for their needs.

In the current climate of Rising Wholesale Prices, it can be easy to focus on the bottom line, however these figures maybe only be showing a small percentage of your Annual Spend.

Types of Commercial Energy Agreements

Essentially there are 4 different types of agreement within the Commercial Energy Market.  These are Fixed Price, Fixed Term, Flexible and Blend & Extend Agreements.  We have detailed below a brief overview of each.

Fixed Price Agreements

Fixed Price Agreements are the most popular with SME businesses, as these ensure your prices are fixed for the full duration of your contract.   These contracts allow you to secure a price for your energy that you are happy with, knowing it will not change for the duration of your agreement.

If you are looking for overall Budget Certainty on your Energy Costs, it is important for you to secure a Fixed Price Agreement.

These agreements are similar to purchasing a full year’s worth of fuel from your local petrol station at one time, at a price you are happy with.

Fixed Term Agreements

Fixed Term Agreements can be easily confused with Fixed Price Options, however these only ensure you are contracted with a supplier for an agreed period.  Due to this your Energy Prices can change at any point during the term, depending on your agreement in place. 

These agreements are similar to making a commitment to purchasing an item of shopping from a Supermarket for a set duration, without agreeing on a price, which will then change during the term.

Flexible Purchasing Agreements

Flexible Purchasing Agreements are extremely popular with larger energy users, as they allow you to secure specific elements of your contract for an agreed duration, whilst also allowing you to hold off purchasing Wholesale Energy until a later date, at hopefully a better price for your business.

It is worth noting these types of agreement do not guarantee a saving compared to Fixed Price Contracts and would require a large amount of input from businesses to ensure they are on hand to take advantage and secure preferred prices, when available. 

These agreements are similar to committing to purchasing Fuel from a specific Petrol Station for a set duration, however needing to drive past and monitor prices on a regular basis until you see costs you are happy with.

Blend and Extend Agreements

Blend and Extend Agreements are usually offered as an incentive to businesses paying higher prices than the Wholesale Market, as once in place you can reduce current costs by extending your contract with your supplier, for a further duration.  It is important to note that these agreements will not see you reduce the overall price you are paying for the Energy secured on your current contract, but only see you pay slightly less, for a longer period than you originally agreed.   

Furthermore, due to suppliers having to recoup costs of your original agreement, the additional will then be included on top of the prices secured, for the extended portion of your contract.  Due to this, it is likely that for the extended portion of your contract, you will be paying significantly more than Wholesale Market Prices you could secure, for the period in question.

These agreements are similar to already having a contract with a Petrol Station to purchase fuel for a set duration at a fixed price, however agreeing a further commitment to use the facility for an additional period at a higher price than Wholesale Costs, only to reduce your current spend.

What can I do if I have any questions or concerns?

If you are unsure, or if you have any questions regarding your current agreement, or the renewal prices you are receiving, CostAdvice – Energy Specialists are here to help. 

CostAdvice – Energy Specialists work with over 20 different licensed Commercial Electricity and Gas suppliers, so you can be sure we’re able to help with all types of Commercial Energy Agreements, including the ones detailed above.

For a Free, No Obligation review of your Energy Portfolio or Upcoming Renewal Quotes, please get in touch with Daniel Walker on 01246 252788, whereby he will be happy to help.