Most business owners understand that energy markets can be volatile at times. Keeping the cost of utilities down is a constant battle, especially when you are tied into the wrong type of contract.
Energy procurement is a vital part of any business operation. As with domestic energy supplies, business owners are encouraged to change provider to get a better deal when their contract comes up for renewal.
Most companies end up agreeing a fixed price for their utilities and this can be a good idea. It certainly gives you peace of mind knowing what you’re going to be paying over the next few years.
But could a flexible energy contract deliver better results for your business? Working with a commercial energy broker can make a big difference in what you end up paying over the terms of your contract.
Flexible Energy Contracts
The energy market can go up or down depending on supply and demand and various other factors. If you’re on a fixed rate and the price of fuel drops below that, you could essentially end up paying more for your fuel. Most businesses work on the basis that this evens itself out over the course of the contract.
Flexible solutions are, however, becoming more popular among businesses because it allows them to react better to the volatility of the market. If you are a small or medium size company with fairly low energy usage, you may not notice much difference between a fixed rate or flexible contract.
For those with high usage, however, the employment of a flexible energy contract has one big benefit. It allows the procurement officer or energy broker to pick and choose when energy is purchased and over what period.
In order to do this effectively, however, you need to have a clear strategy in place and knowledge of the market. For some businesses, especially big corporations, that means employing someone experienced and qualified enough to take decisions. For other companies, it means using an energy broker who will keep an eye on the market and make the appropriate purchasing decisions at the right time.
Pros and Cons of Flexible Energy Contracts
The pros of flexible energy contracts include:
- The opportunity to spread the price risk for your utilities.
- More freedom in the way that you buy your energy.
- Greater control enables you to make savings and put that money towards running your business.
- Your energy usage is more transparent.
The cons of a flexible energy contract are:
- You need to find a supplier that provides flexible energy contracts.
- You require detailed knowledge of the market, either in-house expertise or a third party energy broker.
- It’s suited to businesses and organisations with high volumes of energy usage.
- You need smart meters to monitor energy usage.
On the surface, flexible energy contracts can seem a little complicated and harder work than a fixed rate contract. If you have a fairly large energy usage, however, building a relationship with a broker can help you achieve significant savings for your business.