One way that you can control your business spends is through your energy contracts. Without careful consideration when it comes to your contracts you could overspend by thousands!
Should you lock in your energy prices for one, two, three years, or even longer? The answer depends on several factors, and taking a strategic approach can help you make the best choice for your business.
What is a fixed rate energy contract?
A fixed-rate energy contract locks in your energy price per unit for a set duration, protecting your business from market volatility. While this can offer stability and predictability, choosing the wrong contract length could lead to unnecessary costs or missed opportunities for savings.
Key benefits of fixed-rate contracts include:
- Budget certainty: Predictable monthly energy costs.
- Protection from price increases: Shielding your business from market spikes.
- Simplified management: Fewer surprises, allowing you to focus on other business priorities.
What to consider when choosing contract length?
When deciding how long to fix your business energy contract, consider the following factors:
Current market trends
Energy prices fluctuate due to a range of factors including supply and demand, geopolitical events, and government policies.
If prices are currently low, locking in for a longer duration might be advantageous. However, if prices are high, a shorter contract could give you flexibility to renegotiate when rates stabilise.
Make sure you speak to someone such as an energy broker with a lot of market knowledge before making this decision.
Future price predictions
Forecasting energy prices is complex, but it’s an essential part of the decision-making process. While no prediction is foolproof, market trends and expert analysis can provide valuable insights.
For example, during periods of anticipated price rises, securing a longer-term contract could save your business money.
Your business's financial position
How much flexibility does your business need? A longer-term contract ensures price stability, which can be critical for businesses with tight budgets.
Conversely, if your business can absorb some volatility, shorter contracts may offer opportunities to capitalise on falling prices.
However carefully assess the market situation before you do this. If you choose a variable tariff in a period of high volatility you could cause your business a lot of added unnecessary financial pressure.
What are your Industries specific needs?
Energy-intensive industries, such as manufacturing, may benefit more from long-term contracts to secure stable rates, while businesses with lower consumption might prefer shorter commitments.
Seeking advice from professionals that work with your industry can be a big help in deciding what to do.
The Role of Energy Brokers
Navigating the energy market can be overwhelming, which is where energy brokers like Resolve Energy come in. These professionals offer tailored advice, helping you weigh the pros and cons of various contract durations based on your unique needs and market conditions
How Energy Brokers Can Help
- Market expertise – Our team of energy brokers stay updated on market trends, price forecasts, and supplier offerings, ensuring you have the most accurate and relevant information.
- Customized recommendations – Our team will also analyse your energy usage, budget, and risk tolerance to recommend the optimal contract length.
- Time savings - We handle negotiations with suppliers, saving you time and effort.
- Access to competitive rates - Through our networks, our team can often secure better deals than what’s available directly to businesses.
By leveraging their expertise, you can make an informed decision with confidence.
Pros and cons of short and long term contracts
|
Aspect |
Short-Term Contracts (1-2 years) |
Long-Term Contracts (3+ years) |
|
Flexibility |
High: Easier to adapt to market changes. |
Low: Locked in for a longer period. |
|
Protection from Volatility |
Low: May face price changes upon renewal. |
High: Shields from market fluctuations for an extended time. |
|
Cost Savings Potential |
High: Potentially higher if prices drop after the contract ends. |
Low: Opportunities may be missed if prices decrease significantly during the term. |
|
Budget Certainty |
Low: Frequent renegotiations needed. |
High: Predictable costs over a longer period. |
Finding the right balance
To determine the ideal contract length for your business, combine insights from multiple sources:
- Market research: Stay informed about energy price trends.
- Historical data: Analyse your past energy costs and consumption patterns.
- Broker advice: Consult with experienced professionals like Resolve Energy for expert guidance.
Taking a comprehensive approach ensures you not only secure a competitive rate but also align the contract duration with your business’s needs and goals.
Fixing your business energy contract for the right length of time is a decision that requires careful consideration of market trends, your financial position, and expert insights. By working with trusted energy brokers like Resolve Energy, you can gain the confidence and knowledge needed to make the best choice for your business.
Remember, there is no one-size-fits-all solution. Whether you opt for a short-term or long-term contract, the key is to base your decision on a well-rounded understanding of your options and market dynamics. With the right strategy, you can manage your energy costs effectively and focus on what truly matters—growing your business.
If you're looking to save money on your energy bills then why not get in touch today? The relationships Resolve Energy has developed with over 24 of the UK’s biggest business energy suppliers allows our energy experts to source the best business energy rates available for your company right when you need them. Request a free quote today and start saving money on your energy.
