For most UK businesses, energy is one of the largest costs they have the least control over. You can't negotiate the weather or the wholesale market, but you can decide how you buy. And the single biggest decision you'll make is whether to fix your rate or leave it to move with the market.

Fixed-price contracts are the default choice for the majority of businesses, and for good reason. But "fixed" doesn't mean what a lot of people assume it means, and the contract structure carries a few traps that quietly cost businesses thousands every year. This guide walks through what a fixed-price contract actually locks in, when it's the right call, how the renewal process really works, and the details worth checking before you sign.

What a fixed-price contract actually fixes

The most common misunderstanding is the most important one to clear up first: a fixed-price contract does not fix your total bill.

What it fixes is the price of energy, not the amount you use. A fixed-price business energy contract locks in two things for the length of the term:

  • The unit rate — the price you pay per kilowatt-hour (kWh) of electricity or gas you consume.
  • The standing charge — the fixed daily cost of being connected to the network, regardless of how much you use.

Both are held steady for the duration of the contract, typically anywhere from one to five years. Your actual bill still rises and falls with consumption — a cold winter or a busy quarter will cost more — but the price of each unit won't change underneath you.

This is the core appeal: budget certainty. You know exactly what each unit costs, so you can forecast energy spend with confidence and you're insulated from wholesale price spikes. The trade-off is that if the market falls after you've fixed, you don't benefit. You've traded the upside for protection against the downside.

It's also worth knowing that business energy is not covered by the domestic price cap. Household tariffs are capped by the regulator; business tariffs are not. That makes how you buy considerably more important for a business than for a household — there's no safety net setting a ceiling on what you can be charged, so the quality of your deal comes down entirely to how well you approach the market.

Fixed vs. flexible: the short version

Most small and medium businesses choose between a fixed contract and a variable (or "flexible") one.

A fixed contract gives you a locked unit rate for the term. A variable contract moves with the wholesale market — your rate can drop when prices fall, but it can also climb sharply when they rise, with little notice. Larger, energy-intensive organisations sometimes use genuinely flexible purchasing strategies, buying their energy in tranches across the year to average out market movements, but that's a different game and usually only worthwhile above a certain consumption level.

For the vast majority of businesses, the real choice is simpler: do you want certainty, or do you want to bet on the market? Fixed contracts exist because most businesses would rather know their numbers than gamble on them.

When a fixed-price contract makes sense

A fixed contract is usually the right choice when:

  • You need to budget accurately. If cash flow is tight or you're planning around tight margins, removing energy-price volatility from the equation is worth a lot.
  • You believe prices are likely to rise, or you simply don't want the exposure of finding out. Fixing locks in today's rate against tomorrow's increases.
  • You want a "set and forget" arrangement. A fixed contract needs attention at renewal, but not in between.
  • The market is relatively calm. Locking in during a stable or falling market lets you capture a competitive rate and hold it.

It makes less sense when:

  • Wholesale prices are unusually high and expected to fall. Fixing at the top of the market means you're locked in while everyone else's rates come down. In volatile periods, a shorter fixed term can be a sensible middle ground — you get certainty without committing for years at an elevated price.
  • Your usage is about to change dramatically — a major expansion, relocation, or contraction — in which case the contract you sign today may not fit the business you're running in six months.

There's no universally "correct" length. A longer term gives more years of certainty but locks you in if the market improves; a shorter term keeps you flexible but exposes you to renewing more often. The right answer depends on where the market is when you sign and how much certainty your business needs.

Desk calendar, energy bill and phone reminder showing a contract renewal deadline

How renewal windows actually work

This is where most businesses lose money — not on the rate they sign, but on what happens when a contract ends. Two terms get confused constantly, and the difference matters:

  • Your renewal window is the period in which you can lock in new rates with your current supplier — typically the last several months before your end date, and often as early as six to twelve months out.
  • Your notice period (where one applies) is the deadline to formally tell your supplier you're leaving.

They are not the same thing, and missing either can be expensive.

Here's the sequence for a typical fixed-term contract. Your supplier is required to print your contract end date and notice period on every fixed-term bill, so the information is always in front of you if you know to look. Ahead of the end date, the supplier sends a statement of renewal terms — usually around 60 days before, sometimes up to 90 — setting out your current prices, your consumption, and the new rates on offer if you do nothing.

What happens if you do nothing depends on your business size, and this is the part worth getting right:

  • If you qualify as a microbusiness, the rules have tightened in your favour. Since October 2022, microbusinesses generally no longer need to give termination notice to leave a standard fixed-term contract at its end date — you can simply switch. The exception is if you're on an "evergreen" or rollover tariff, where notice may still apply. Any rollover a supplier does apply to a microbusiness is capped at 12 months maximum.
  • If your business is above the microbusiness threshold, you usually still need to serve formal notice — commonly 30 days, but check your contract, as some are longer. Larger businesses also get fewer of the regulator's protections, so the responsibility to track dates and act in time sits firmly with you.

The danger zone is out-of-contract or deemed rates. If a fixed contract ends and you neither sign a new deal nor switch, you don't just keep paying what you were paying — you roll onto the supplier's default rates, which are designed to be uncompetitive. These rates are often cited as running around 80% higher than a negotiated contract. Businesses that drift onto them, sometimes for months, end up subsidising their own inertia. The whole point of treating the renewal window as a hard deadline is to never let this happen.

The practical takeaway: don't wait for the renewal letter to start thinking. Note your end date the day you sign, and begin reviewing the market three to six months ahead — earlier if you want the option to time your re-fix to favourable conditions. A renewal handled early is a renewal handled on your terms.

Are you a microbusiness? It changes your protections

Because the rules differ so much by size, it's worth knowing where you stand. The regulator (Ofgem) defines a microbusiness as one that meets at least one of these:

  • Fewer than 10 employees (or full-time equivalent) and an annual turnover or balance sheet no greater than €2 million; or
  • Uses no more than 100,000 kWh of electricity per year; or
  • Uses no more than 293,000 kWh of gas per year.

If you fall inside that definition, you get a meaningful set of protections: clearer renewal communications, the relaxed notice rules above, rollover caps, and access to the Energy Ombudsman if a dispute with a supplier can't be resolved. Above the threshold, those protections largely fall away — Ombudsman access generally isn't available unless your supplier has opted in voluntarily — so the onus is on you (or your broker) to manage the relationship and the deadlines.

Businessperson reviewing energy comparison charts on a laptop

What to watch when you lock in your rate

Once you've decided to fix, the headline unit rate is only part of the picture. Run through these before you sign:

  1. Look at the standing charge, not just the unit rate. A tempting unit rate can hide a high daily standing charge. For lower-usage sites, the standing charge can be the bigger driver of your bill. Compare both, and compare the total cost against your actual annual consumption.
  2. Get the usage figure right. Most quotes are built on your estimated annual consumption in kWh. If that estimate is wrong, the quote is wrong — and the contract may be priced around assumptions that don't hold. Use a full year of real usage data wherever you can.
  3. Understand exit fees and contract length together. A longer term locks in certainty but also locks you in. Check what it costs to leave early and whether that flexibility is worth having for your situation.
  4. Know whether it's fully fixed or "pass-through." Some "fixed" contracts fix only the wholesale energy element, while leaving third-party costs (network and policy charges) to vary. A fully fixed contract holds everything steady; a pass-through contract can move even though it's marketed as fixed. Ask which one you're being offered.
  5. Compare like for like. When you weigh quotes, line them up on the same terms: unit rate, standing charge, contract length, and exit fees. A quote that wins on one number can lose badly on another.
  6. Check your first bill. Once the new contract starts, confirm the unit rates, standing charge, and end date on your first bill match exactly what you agreed. Errors are rare, but catching one early saves a headache later.

A word on brokers and transparency

Many businesses use a broker to source and compare contracts across the market rather than dealing with suppliers one at a time. A good broker saves you time and gets you in front of more of the market than you'd reach alone. The thing to insist on is transparency: ask how the broker is paid, which suppliers they can access, and ask them to confirm their remuneration in writing. The regulatory framework for brokers is tightening, but the simplest protection is still asking the right questions up front. A broker worth working with will answer all three without hesitation.

The bottom line

A fixed-price contract is the right choice for most businesses most of the time — it buys certainty, protects you from price spikes, and lets you budget with confidence. But "fixed" fixes your rate, not your bill, and the real money is won or lost at renewal. Treat your end date as a hard deadline, start reviewing the market months ahead, never drift onto out-of-contract rates, and read past the headline unit rate to the standing charge, exit terms, and the small print on what "fixed" actually covers.

Get those few things right and energy stops being a cost you react to and becomes one you control.