Fixed rate business electricity contracts explained
What’s actually fixed, what isn’t, and how to decide whether fixing is right for your business this year.
A fixed rate business electricity contract locks your unit rate and standing charge for the term, usually one to five years. It doesn’t fix your bill, which still moves with how much you use, and it doesn’t guarantee you fixed at a good moment. Both distinctions matter more than the word “fixed” suggests.
Quick snapshot
- Fixed means fixed prices, not a fixed bill. Usage still moves the total.
- Most UK SMEs land on 24 or 36 months, trading flexibility for certainty.
- Certainty is a product you’re buying. The supplier has priced their risk into it.
What’s actually fixed
The pence. Your unit rate and standing charge hold for the life of the deal regardless of what wholesale markets do, which is the entire appeal: one line on the P&L that behaves itself. What isn’t fixed is consumption, so a cold January or a new production line still shows up on the bill. Budget certainty per kWh, not per month.
How long to fix
Twelve-month deals suit businesses expecting change: a move, a sale, growth that would make today’s consumption profile wrong by next summer. Twenty-four and thirty-six months are where most SMEs settle, long enough for real certainty, short enough that a mispriced market doesn’t haunt you for half a decade. Five-year fixes exist for businesses that value predictability above everything and understand what they’re paying for it.
On timing the market: nobody rings the bottom, including the people paid to try. Fixing in a calm market period beats fixing in a panic, and that’s about as far as honest guidance goes.
The honest pros and cons
The case for: certainty, simpler budgeting, protection from the spikes that hurt businesses on variable arrangements. The case against: if wholesale falls after you sign, you’ll watch newer deals undercut yours until the term ends, and plenty of businesses that fixed at the 2022 peak spent two years doing exactly that.
There’s also the quiet structural point. A supplier selling certainty has priced in their hedging cost, their risk buffer and their margin. Fixed isn’t automatically the prudent choice; it’s a product with a price, and some years the price is high. Our fixed vs flexible guide sets out the full comparison for businesses genuinely weighing both.
Volume tolerance, the clause that catches people
Many fixed contracts specify a consumption band, often something like 80 to 120 per cent of your contracted volume. Use materially more or less and the supplier can recharge the difference, because their hedge was built on the number you gave them.
Growing businesses trip this by succeeding. Shrinking ones trip it by downsizing. Before signing, check the band, and if your year ahead looks unusual, say so at the quote stage rather than at reconciliation.
When the fix ends
Every fixed deal has an end date and a termination notice window, and the expensive failure is letting both pass quietly. Do nothing and billing moves to out-of-contract rates, or the contract rolls onto terms you didn’t choose. Diarise the notice window when you sign, not when the renewal letter arrives.
Fixed rates and the renewal letter
The renewal offer from your current supplier is a fixed rate deal too, priced for the businesses that won’t compare it. Incumbents know exactly what proportion of customers sign without looking, and the offer reflects that maths, not your loyalty.
The fix is procedural rather than clever: treat the renewal letter as one quote among several, gathered the same day for the same term. Our guide to getting the best electricity quotes covers the whole routine. Sometimes the renewal genuinely wins. It just shouldn’t win unexamined.
Frequently asked questions
Is a fixed rate always the cheapest option?
No. Fixed rates carry the supplier’s hedging cost and risk buffer, so in a falling market a variable arrangement can work out cheaper. What fixed reliably buys is predictability. Whether that’s worth the premium depends on how much a surprise would hurt.
Can we exit a fixed contract early?
Business energy contracts are binding from agreement, and early exit usually means buyout terms rather than a polite goodbye. Some contracts allow it at a price; many don’t meaningfully. Check the exit clause before signing, not after the market moves.
Should an SME choose fixed or variable electricity?
Fix if predictable costs matter more than catching a falling market, which describes most SMEs. Go variable only if the business can absorb swings and someone is actually watching the market. The full trade-off lives in our fixed vs flexible guide.
What happens when the fixed term ends?
If you’ve agreed a new deal, it starts seamlessly the next day. If you haven’t, you land on out-of-contract rates or an automatic rollover, both priced against you. The renewal window opens up to twelve months out, and early rarely costs more.
Can prices change during a fixed contract?
Sometimes, and the contract wording decides it. A fully fixed deal locks everything; a fixed energy-only deal can pass through changes to network and policy charges. The difference lives in the small print under “pass-through”, and it’s worth knowing which you’re signing before you sign it.
What’s a rollover contract and how is it different?
A rollover is a new fixed term your supplier creates automatically when the old one ends without instructions. It binds like any contract, at prices you didn’t negotiate. Different from out-of-contract billing, which you can leave in weeks.
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Clearsight Energy helps UK businesses compare, understand and manage their energy and water contracts.