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Contracts

Fixed or flexible: a guide for large energy users

By the Business Savings Guru team. Last updated 28 October 2026.

On this page
  1. The short answer
  2. What is the difference between fixed and flexible?
  3. Fully fixed or pass-through: what is the second decision?
  4. Who should consider flexible procurement?
  5. What are the risks of flexible contracts?
  6. How do we decide?
  7. How Business Savings Guru helps
  8. Frequently asked questions
  9. Sources

The short answer

A fixed contract locks your energy price for the whole term in one go, which gives budget certainty but means you take the market price on a single day. A flexible contract lets you buy your energy in stages (tranches) over months before and during supply, which spreads timing risk but leaves part of your volume exposed to the market until it is bought. Flexible buying generally suits larger users with the volume, cash flow and governance to manage it; most businesses that value a fixed budget are better served by a fixed contract.

What is the difference between fixed and flexible?

Fixed contracts. The supplier prices all of your expected volume for the contract term on one day. You know your commodity price from day one. If wholesale prices fall afterwards, you do not benefit; if they rise, you are protected.

Flexible contracts. You agree a contract with a supplier, then buy your volume in portions over time, each at the market price on the day it is bought. Your final price is a blend of those purchases. Suppliers set minimum volumes for these products. As one example, British Gas currently lists its entry flexible product for businesses using over 500 MWh a year and its fuller products for over 10 GWh. Other suppliers set their own thresholds.

Baskets (group buying). A variation where several businesses, or several sites in one group, pool their volume and a portfolio manager buys on their behalf under an agreed strategy.

Fully fixed or pass-through: what is the second decision?

Whichever way you buy the energy itself, there is a separate choice about non-commodity costs: network charges, balancing costs, policy levies and metering. These make up a large share of a business electricity price.

  • Fully fixed: the supplier estimates these costs for the whole term and builds them into your rates. You get certainty, and the supplier adds a margin for taking that risk.
  • Pass-through (non-fixed): some or all of these costs are passed to you at actual cost. The headline rate looks lower, but your bill moves if the underlying charges change or your usage pattern shifts.

Pass-through is common on half-hourly electricity contracts for larger sites. It can be good value, but it needs closer bill checking, and when comparing quotes you must compare fully fixed against fully fixed, or pass-through against pass-through. Comparing a pass-through quote with a fully fixed one is the most common way buyers are misled by a low headline price.

Who should consider flexible procurement?

Flexible buying tends to suit organisations that:

  • Use enough energy to meet supplier minimums and make active management worthwhile
  • Can tolerate some movement in their energy budget during the buying period
  • Have a written risk policy agreed with the finance team, setting buying triggers, price limits and who approves trades
  • Have someone, internal or external, who will monitor the market and execute purchases on time
  • Have predictable, well understood consumption, ideally from half-hourly data

It suits less well businesses that need a fixed number for the budget, have limited time to oversee the position, or use relatively little energy.

What are the risks of flexible contracts?

  • Open position. Until all volume is bought, part of your cost is unpriced. If the market rises sharply before you buy, your blended price rises with it.
  • Governance. Without an agreed strategy, decisions can stall or be made under pressure.
  • Volume tolerance. Flexible and fixed contracts may have bands within which your consumption must fall. Using much more or less than forecast can bring extra charges. Check the volume terms.
  • Complexity. Reconciliation of tranches and pass-through costs takes more effort to check.

How do we decide?

Start with three questions for the board or finance team:

  1. How much budget variance can we tolerate over the contract term?
  2. Do we have the volume and the oversight to run a buying strategy?
  3. Are we comparing like for like on non-commodity costs?

If the answer to the first is "very little", a fixed contract is usually right. If you have the volume and the governance, a flexible or basket approach may be worth tendering alongside fixed options so you can compare.

How Business Savings Guru helps

Business Savings Guru compares quotes from our panel of over 20 energy suppliers. We set every quote out on the same basis so fully fixed and pass-through prices are not confused, and explain the volume terms of any flexible option a supplier offers. We are a member of the Energy Ombudsman (membership number C35ENER126) and our commission is disclosed on the energy contract you sign.

Frequently asked questions

Is a flexible contract cheaper than a fixed contract? Not automatically. It can produce a lower average price if purchases are well timed, but it can also produce a higher one. The main benefit is spreading timing risk, not a guaranteed saving.

What is a tranche? A portion of your total energy volume bought on a particular day at that day's market price. Several tranches are blended into your final price.

What does pass-through mean on a business energy contract? Some non-commodity costs, such as network and balancing charges, are billed at actual cost rather than fixed into your rate. Your bill can change during the contract as a result.

What minimum usage do we need for a flexible contract? It depends on the supplier. Thresholds vary widely, so ask for each supplier's current minimum when you tender.

Can we mix fixed and flexible across sites? Often yes. Some groups fix smaller sites and buy their largest sites flexibly, or fix a proportion of volume and leave the rest flexible.

Sources