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  • Our experts process over 93,000 invoices per month and we've recovered over £11m in over-charges for our clients in the last year
  • We provide support to over 500 businesses for energy and carbon management
  • Our solutions team have identified savings of £37.5m per annum for our clients, a total of 495,338,992 kWh savings identified
  • Last year we saved our CCA clients alone £25.5m

Options, options, options: which approach best suits your business?

When the time comes for your business to review its energy procurement strategy, it can be difficult to know which contract options are best for you. There are so many products out there that choosing one that meets all of your business’s needs can seem like an impossible task – that’s where having access to the expertise of consultancies like Inenco can really come in handy. Although every product is different, they all fall under two different categories: fixed or flexible.

Is your business suited to a fixed or a flexible contract?

With a fixed contract, you make a single transaction at the current commodity price, which is the price you pay for the duration of your contract. If you enter into a flexible contract, you (or a consultant acting on your behalf) will make multiple buying decisions throughout your contract, paying market-reflective prices each time you buy.

Here are some key areas you should consider before you choose whether to fix or flex:

  • What is the energy market like currently?

If energy prices are currently high, it’s probably unwise to lock yourself into a contract, as you’ll then find your business is stuck paying high prices even if market prices fall. If prices are low then it could pay to fix at the low rate and protect your business from future rises.

Energy prices have been volatile for some time and, with the political uncertainty in the UK, are likely to remain changeable for the foreseeable future, so it’s difficult to say if fixing will be beneficial or not.

  • What’s your business’ appetite for risk?

While neither fixed nor flexible contracts are without risk, many risk-averse businesses choose fixed contracts as once you fix, you can rest assured that your costs will not rise for the rest of your contract. However, a risk premium will be built into your contract, so you will pay more than cost for the energy you use.

Flexible contracts have an element of risk because costs rise and fall according to the market, so when prices rise you could find that you’re paying more than you would be if you had fixed. This risk can be managed if you monitor your non-commodity costs closely and take advantage of bearish markets (when prices are trending downwards). You can also choose how far in advance you wish to purchase your energy; if you buy your energy years in advance – the ‘far curve’ –  then you can lower your risk, whereas if you buy in the immediate market – the ‘prompt’ market – then your risk will be higher.

So while flexible contracts are inherently riskier than fixed contracts, there are ways to mitigate that risk.

  • Do you need absolute budget certainty?

Whether you should opt to fix or to be flexible with your energy procurement also depends on how flexible you can be with your business’s energy budget. If you have a tight budget and need complete control over your energy costs, then your business is probably best suited to a fixed contract, as with a fixed cost you know how exactly how much you’ll be paying for your energy and can ensure that you budget accordingly.

If your budget is a bit more fluid, however, you could afford to be flexible. Your energy costs are likely to go up and down, meaning that you will need to allow space in your budget to accommodate for price rises. But you will also have the opportunity to take advantage of low market prices, so you might find that you have budget to spare.

  • Could working with a consultancy benefit your business?

Many businesses opt for fixed price contracts because they don’t have the expertise or the time to make the multiple decisions involved in a flexible procurement strategy. If you’re sure that a fixed contract is right for you, a consultancy can help you to choose the ideal fixed product to suit your business’s needs. And, if you’d like to try flexible procurement, but you’re concerned that you don’t have the resources, a consultancy could also be the answer.

Our Inenco energy experts have years of experience in the industry, and they have a complete view of market influences, from commodity markets to long-range weather forecasting. This insight enables them to make well-informed decisions about when to buy energy, and they can completely manage your flexible procurement on your behalf. Importantly, you can also choose your own level of risk – you state your risk parameters when signing the contract and our consultants will work within them.

Small businesses can also benefit from using a consultancy if they are too small to participate in flexible procurement on their own. At Inenco, we pool smaller businesses together within our Options portfolio product, enabling them to access market-reflective prices that they wouldn’t be able to access on their own.

If you’re unsure whether a fixed or a flexible contract is right for your business, Inenco’s team of experts is on hand to offer impartial advice – call us today on 0845 463626 or email