Fixed rate business energy

What a fixed-rate business energy contract is

Ofgem describes fixed-rate contracts as fixing the price of unit rates and standing charges for the length of the contract, so the cost per kWh stays the same no matter what happens to wholesale market prices. That makes energy costs easier to budget for.

A fixed-rate contract is agreed for a set term with a licensed supplier. You agree the rates, the term and the end date up front, and the contract sets out what happens if you want to leave early and what happens when it ends. It can cover business electricity, business gas or both, as a dual fuel for business arrangement, usually with separate terms for each fuel.

Fixed is one of several business energy tariffs. The others, including variable, flexible and pass-through contracts, are compared on that page.

What is fixed, and what can still change

A fixed rate fixes the price of energy, not the bill. These are the things that can still move:

• Your consumption: the bill is the unit rate multiplied by the kWh you use, plus the standing charge for each day. Use more, or have a cold winter on gas, and the bill goes up even though the rates have not.
• Pass-through elements: some contracts fix the energy price but pass on certain non-energy costs as they change. Ofgem's guidance for microbusinesses warns that some bill factors may be presented on a pass-through basis and that you should check whether your price may vary within the term. A contract that fixes everything is often described as fully fixed; see pass-through energy contracts for the alternative.
• Taxes: VAT and the Climate Change Levy are shown separately on the bill. CCL rates are set by government from 1 April each year, and the VAT you pay depends on how the energy is used (see reduced rate VAT on business energy).
• Estimated bills: if the supplier bills on estimated reads, the amount can change when actual readings arrive. Automatic reads from a smart or AMR meter help avoid that.

When you compare fixed quotes, ask each one the same question: which charges are fixed for the term and which can change?

Contract length, broker commission and early exit

Contract lengths vary by supplier and by the size of your business, and you can usually ask for quotes for more than one term. A longer term fixes your rates for longer; a shorter term gives you an earlier chance to review. Neither is right for everyone, so it helps to look at your usage, plans and contract dates before choosing a term.

Ofgem says many business contracts are fixed term, so you should be clear how long you would be locked in and whether there is a termination fee. Its switching guidance adds that most suppliers will not let you leave a fixed-rate contract before the end unless you have agreed a termination clause or pay an exit fee. If you expect to move, sell or close the business during the term, raise it before you sign: our guide to business energy when moving premises explains what happens to supply at a new site.

Broker commission is part of the price too. Unless you opt at the start to be invoiced directly, Fidelity Energy's commission is paid by the supplier and added as an uplift on the unit rate and/or the daily standing charge, and the estimated amount is set out in your contract documents. Since 1 October 2024 Ofgem has required broker fees to be shown in the principal terms of all non-domestic contracts.

The switching window and the end date

Every fixed-rate contract has a switching window: a set period, which Ofgem says opens a few months before the end of the contract, when you can renew with your supplier or tell it you intend to leave. You can sometimes switch during this window without paying a fee. The notice you need to give is in your contract terms, so check it early.

What happens if you do nothing depends on the supplier and the contract:

Microbusinesses get extra help here: their supplier must give renewal price information before the contract ends, and for evergreen contracts it must limit termination notice to 30 days and acknowledge a request to end the contract within 5 working days.

The simplest protection is to note the end date and the opening of the switching window as soon as you sign. To weigh up offers or move supplier at renewal, our sister site explains switching supplier.

Who a fixed rate suits

A fixed-rate contract tends to suit businesses that:

• Want to know their energy rates for the year ahead, for budgeting, pricing or lending
• Have fairly steady consumption, such as offices, shops, surgeries, salons and small workshops
• Do not have the time or appetite to watch wholesale markets
• Have a non-half-hourly meter and modest annual use, where flexible buying is not usually offered

The trade-off is that the rate is locked in. If wholesale prices fall after you sign, a fixed contract does not follow them down, and leaving early usually costs money. Larger users who want to spread that risk sometimes look at flexible energy contracts instead.

What you need for a fixed-rate quote

Suppliers price a fixed contract from your site details and consumption. Ofgem's switching guidance says you will need to give a new supplier information including your annual consumption and details of your meter. To get started, have these ready:

1. A recent bill for each fuel, showing the current supplier, tariff and end date if it is fixed
2. Your MPAN for electricity and your MPRN for gas
3. Your annual consumption in kWh, or a year of bills so it can be worked out
4. Your business details: legal name, company number if you have one and the supply address
5. Your contract end date and any notice you need to give

How we can help

We introduce you to Fidelity Energy, an independent energy consultancy and broker, and help you pull together the bills and meter details above. Fidelity Energy gets fixed-rate quotes from its network of suppliers, explains how each is built (including whether it is fully fixed), arranges the contract you choose and supports you through to renewal. Your contract is with the supplier, and you decide whether to go ahead.

Pricing depends on your consumption, meter and contract dates, so ask us for a quote. Want a fixed price for your business gas or electricity? Contact us.