When searching for the right supplier of your business energy, you’re going to come across a lot of terms and plans that may be unfamiliar to you. Whilst the terminology might differ slightly depending on the supplier; generally, energy plans and contracts fall into two distinct categories: fixed and variable contracts.
Fixed Energy Contracts
A fixed contract is exactly what it sounds like. The price of your gas or electricity is locked in from the moment the contract is agreed. This means the price stays the same for the length of your contract. The advantage of a fixed contract is that it makes budgeting manageable because you know exactly how much you will spend on your energy. Furthermore, a fixed rate can protect your business against spikes in gas and electricity prices in times of volatility.
Advantages:
- Usually cheaper than variable contracts
- Protected from market volatility
- Helps you budget effectively
Disadvantages:
- Exit fees should you wish to change contract
- Locked into a price could mean you pay more than the market rate
Variable Energy Contracts
A variable contract is a very different type of contract. With a variable contract, your gas and electricity prices vary and is charged against the market price. For some businesses, this has proven popular because a variable contract allows companies to capitalise on lulls and slumps in the market price of energy.
However, some see variable contracts as riskier than fixed contracts. Whilst a fixed contract could result in you being fixed into a contract paying more than the market price of energy, variable contracts cannot provide the security of continuity. Variable contracts could expose you to volatile market prices and make planning and managing your energy consumption and budget more difficult.
Advantages:
- Allows you to capitalise on market prices
- Avoids being locked into higher than market prices
Disadvantages:
- Higher risk
- Lack of continuity in spending
- Harder to predict total cost of energy bills
How Can Reduce My Costs Help You?
Choosing between a fixed and variable contract depends on your level of risk and your energy consumption. However, deciding which contract is best for you can be difficult and even daunting without speaking with an industry expert.
At Reduce My Costs, our industry experts are here to help. We provide you with a dedicated account manager who will get to know your business, its consumption, and your needs. By understanding each of these, our experts can help you find contracts and energy solutions that take the pressure off your shoulders, allowing you to get on with doing what you do best.
Get in touch today to find out how Reduce My Costs can help you find the best deal on your business energy.
