What Are Flexible Energy Contracts
Although Flexible Energy Contracts have been available for many years, traditionally energy contracts for gas and electricity are fixed price contracts set over the term of the agreement. The prices for a fixed term contract are calculated by averaging out all of the fixed and variable costs over the length of the agreement. However over recent years suppliers have looked for more ingenious ways to capture customers attention with new and innovative products that allow a customer to spread some of the risk associated with going to the market in one go as is such for a fixed price contract. Review our Half Hourly Flexible Brochure and an overview of our approach and methodology process.
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Generally the reasons why most businesses opt to choose a fixed price agreement is that it eliminates any risk associated with gambling on the price of the wholesale energy market and provide budget certainty over a period of time.
Indeed if the market is at a low point and future prices are expected to rise, then a fixed term contract can be very appealing as it would protect a business against these rising costs.
However in a falling market the opposite can be said and many companies have been forced to lock into a market at a higher point only to watch prices slide beyond there original contract prices.
If we look at the analogy of the mortgage market for you home then the securing of an energy contract is very similar. Some people prefer to have some price protection over a set period of time, whereas others prefer to take more risk and take a gamble on the market working in there favor. Either way what ever approach you take either low risk or high risk, it has to be the decision that you are most comfortable with.
The same is true in your business buying decision and you have to be comfortable with your company’s attitude to risk, and if these types of products are right for you. Over the last few years many suppliers have introduced a range of flexible energy contracts mainly suited to larger consuming customers, because of the complexities associated with managing these types of products.
However flexible energy contracts provide the ability to spread energy purchasing decisions over a period of time, and to spread some of the risks associated with large commercial purchases.
The basic idea of a flexible energy contract is the ability to have complete transparency over the component parts that make up your final energy bill. They allow you to fundamentally separate the delivery and distribution costs from the cost of purchasing the energy at wholesale prices. In the most basic of flexible contracts you would simply lock away all of your fixed costs at the start of the contract such as delivery, distribution and cost to serve. You would then purchase your energy requirements for future delivery such as purchasing 6-months in one go, followed by additional 6-months at a later date.
By purchasing your requirements on the wholesale market allows you to see the true cost of energy required on a month by month basis and the greater the benefit the higher the associated risk.
For example it is possible to purchase energy today for delivery tomorrow, but imagine what would happen if there was as sudden failure of the supply network or an unforeseen political event, which would immediately impact the market, you would be forced to buy the energy required at what ever the market price was.
That’s why it’s always advisable to have a planned risk strategy for your business and a procurement policy that clearly defines your method for purchasing, and how you can minimise the risk associated with not buying a fixed price contract.
We have a range of flexible energy contracts and wholesale energy contracts on offer to ensure that even the most diverse requirements can be met. Our experienced team will work with you to asses your requirements, recommending the type of flexible energy contracts most suitable for your business requirements.
With our flexible half hourly energy contracts you can join an energy portfolio of over £1 Billion of delivered energy. Traditionally reserved for those companies with a minimum energy consumption of 50GWh per annum, it is possible to trade your commercial requirements as a commodity in the wholesale market, much in the same way that traditional energy suppliers buy from this market at the moment, to supply energy direct to its own customers.
However by combining the consumption of a number of businesses in a portfolio arrangement, sometimes called an energy basket, we can trade this portfolio as a notional company and thereby bringing the advantages of the wholesale market to much smaller organisations.
Please contact us to discuss your flexible energy contracts requirements as these types of contracts are limited and are only available to businesses that consume over £150k a year.
They are available for both gas and electricity and they will allow you to be more responsive to changing market prices throughout the year and as such, reduces the risk of fixing all of your volume at a time when prices are at a peak. Please contact us to discuss our full range of flexible energy contracts for your business. As a market leading business energy broker we can offer a comprehensive choice of flex energy contracts and flex gas contracts to suit your commercial requirements.