The advantage of a fixed term energy supply contract is that the price is fixed during the agreed term of the contract. Fixed term contracts are available for duration of between 1 and 5 years. How long you should fix your prices for is really dependent on the current wholesale market conditions, which is the key driver for the retail price of electricity.
Many businesses that use a professional consultant or broker will expect expert advice and guidance on the correct term to fix their prices for. No one is able to 100% predict what energy prices will be doing in the future , if they did, they would be on a beach in the Bahamas because they would never need to work again !!!
The other rule of thumb that has served us and our customers extremely well is "whichever way the energy suppliers are pushing, we push the opposite". At the end of the day, energy supply companies are responsible to their shareholders not their customers, they are always looking to make maximum profits from supplying energy.
When is a Fixed Term Contract not a fixed price?
You would expect that having agreed to a fixed term electricity supply agreement, the price was fixed for the duration – well think again. With certain suppliers, their terms and conditions provide them with the option to increase prices. You need to either read the terms and conditions extremely closely or use a consultant or broker that understands the differences between competing suppliers’ terms and conditions.
28 Day rolling supply contracts
About 500,000 businesses are supplied under this form of contract and are usually businesses that have never switched supplier since the electricity market de-regulated.
The bad news is that it is estimated that customers on these supply agreements are being charged up to 100% more than customers who have managed their contracts correctly. Prices for these customers have been seen as high as 14 - 23 pence a unit of electricity and 7 pence per unit of gas. By simply agreeing a fixed term contract with your current supplier or switching supplier, your business could reduce its energy bills by up to 100%.
The good news is that businesses with this form of supply agreement can arrange a contract with their current supplier or switch supplier quickly by providing their current supplier with a 28 days written termination notice.
The disadvantage of this form of supply agreement is that the supplier may increase your electricity or gas prices at short notice. It is unusual for price decreases to be offered!
This contract applies when you move into a new Business premises, and have not proactively signed up for a new supply of gas and electricity. In such circumstances you will be 'deemed' to have automatically taken over the contract with the gas or electricity supplier of the previous occupant. You will, by default be placed on a 'deemed tariff' with that supplier, which is either their standard credit rate or a specially inflated tariff which could be 30%+ more expensive than that supplier's most competitive offer