Business Energy Contracts Explained: Fixed vs Variable, and What to Check Before You Sign

Business energy contracts don’t all work the same way, and the terms matter as much as the headline rate. Here’s what the main contract types actually mean, and what’s worth checking before you sign anything.

Fixed-rate contracts

Your unit rate is locked for the length of the contract, typically one to five years. This gives certainty for budgeting, but it also means you won’t benefit if wholesale prices fall during that period — and switching out early usually carries an exit fee calculated against the remaining contract value. Fixed contracts suit businesses that value predictable costs over the chance of catching a lower rate later.

Variable and deemed rates

Variable rates move with the wholesale market and can change month to month, which suits businesses comfortable with some uncertainty in exchange for flexibility. Deemed (or “out-of-contract”) rates are different — these are what you’re automatically moved onto if a fixed contract ends without a new one being agreed, and they are almost always the most expensive option available on the market. Unlike a genuine variable tariff, a deemed rate isn’t something any business would choose deliberately; it only ever happens by accident.

Pass-through and fully-inclusive contracts

Some contracts pass certain network and government charges directly onto your bill as they change, while “fully inclusive” contracts bundle everything into one fixed unit rate agreed up front. Pass-through contracts can work out cheaper overall since you’re not paying a supplier to absorb that risk on your behalf, but they carry more uncertainty month to month — so they suit larger, more sophisticated energy users more than a typical small shop wanting a simple, predictable bill.

Dual fuel vs separate contracts

Taking gas and electricity from the same supplier under one dual-fuel contract usually simplifies billing and can come with a small discount, but it’s not automatically the cheapest option — sometimes the best gas rate and the best electricity rate are with two different suppliers. It’s worth checking both ways rather than assuming a bundled deal is best by default.

What to check before signing anything

• The exact contract length and renewal window — when can you switch without a penalty?
• Early exit fees, if any, and how they’re calculated
• Whether the rate is fully inclusive or pass-through
• The notice period required if you decide to leave at the end of the term
• Whether the quote includes any broker or administration fees on top of the unit rate

We check all of this for you

Every comparison we run includes a plain-English read of these terms, not just the headline rate — see our full business energy comparison to get started, or get a free quote if you already have a bill to hand.