This can be confusing if you do not know what are the types of energy contract are available. However, the article will help clarify these differences and how they differentiate from each other so that you know which one is right for your company, each with its unique benefits and drawbacks that businesses should consider before making a decision.
Variable Business Energy Contract
Variable rates are the most popular type of business energy contract. This is because they offer businesses the most flexibility. Businesses can take advantage of lower energy prices when the market is down and lock-in rates when the market is up. However, this type of contract does come with some risks. If energy prices spike, businesses could be stuck with a high bill.
Fixed Business Energy Contract
Fixed rates are the second most popular type of business energy contract. This is because they offer businesses predictability. Businesses know exactly how much they will be paying for their energy each month, no matter what the market does. This can help businesses budget and avoid any surprises.
There are pros and cons to every type of business energy contract, and fixed business energy contracts are no different. On the plus side, a fixed contract can give you peace of mind, as you will know exactly how much you are paying for your energy each month. This can help with budgeting and cash flow planning. And, if energy prices rise during your contract term, you will be protected from having to pay more.
However, there are downsides to fixed contracts too. First and foremost, you could end up paying more than you need if energy prices fall during your contract term. Also, you may have to pay an early termination fee if you want to switch to a different supplier or tariff before your contract ends.
A “deemed” business energy contract is an agreement between a company and an energy supplier in which the company agrees to purchase a certain amount of energy from the supplier over a period of time. The main advantage of this type of contract is that it can help stabilize the company’s energy costs. The downside is that the company may have to pay higher energy prices if market prices rise. In addition, the company may be required to purchase a minimum amount of energy each month, even if it does not use all of the energy. This can result in wasted energy and higher costs.
Rollover or Evergreen Business Energy Contract
A rollover or evergreen business energy contract is an agreement between a business and an energy supplier that renews automatically at the end of the fixed term. The main advantage of this type of contract is that it offers businesses continuity and stability, as they do not need to go through the hassle of finding a new supplier every time their contract expires. However, the disadvantage is that businesses may end up paying more for their energy if they do not keep on top of the market and switch to a more competitive deal when their contract comes up for renewal.