Business energy contracts can feel harder to get your head around than personal ones. Prices change, terms are longer and the consequences of getting it wrong can stick around for years rather than months.
This guide explains how business energy contracts work, what the key terms mean and what to look out for before you agree to anything.
What's a business energy contract?
A business energy contract is an agreement between your business and an energy supplier to provide gas, electricity or both at agreed rates for a set period of time
Most business contracts are fixed term. That means you’re committing to the deal for the length of the contract rather than being able to switch freely.
Contract lengths and why they matter
Business energy contracts usually run for one, two or three years, though shorter and longer terms do exist.
Longer contracts can offer more price certainty, which helps with budgeting. Shorter contracts give you flexibility but may come with higher rates.
The right length depends on how much certainty you want and how comfortable you are committing for that period.
Understanding unit rates and standing charges
Your energy costs are made up of two main parts.
The unit rate is the price you pay per kilowatt hour of energy used. The standing charge is a daily fee for being connected to the energy network, regardless of how much energy you use.
A low unit rate can still lead to higher bills if the standing charge is high, so it’s important to look at both together.
Fixed vs variable contracts
Most business energy contracts are fixed rate. That means your unit rate stays the same for the length of the contract.
Variable contracts can change in line with the market. They offer flexibility but less certainty, and prices can rise during the contract period.
Fixed contracts suit businesses that want predictable costs. Variable contracts may suit those willing to accept more risk.
Renewals and auto rollover
One of the biggest catches in business energy contracts is automatic renewal.
Many contracts roll over automatically if you don’t give notice within a specific window. The new rate is often higher than your original deal. Knowing your contract end date and notice period helps you avoid this.
Exit fees and switching
Leaving a contract early usually comes with exit fees. These can be significant, especially on longer contracts. Some suppliers allow switching within a certain window near the end without penalty. Others don’t. Always check the exit terms before signing so you know where you stand.
Who’s responsible if you rent
If your business operates from rented premises, responsibility for the energy contract isn’t always clear.
Your lease should say whether you or the landlord manages the energy supply. If it’s shared, it’s worth agreeing this in writing before entering a contract.
Business energy contracts don’t need to be complicated, but they do reward attention. Understanding the basics helps you choose a deal that fits your business and avoids surprises later.
