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What are Energy Contracts?

Mar 06, 2023

Understanding energy can be overwhelming because there are many technical terms and various options to choose from. Energy contracts are one part of this. It’s important to understand these contracts because they can have a significant impact on your business’s energy costs. We’re here to help you understand what energy contracts are and how they can affect your business.

Energy contracts are agreements between energy suppliers and customers that determine the terms and conditions for the supply of energy. As a small business owner, it’s important to understand how energy contracts work so that you can make informed decisions about your energy usage and costs.

When you sign an energy contract, you agree to purchase a certain amount of energy from a supplier over a specific period of time. The contract will typically include details such as the price you will pay for energy, the length of the contract, and any penalties or fees that may apply if you breach the terms of the agreement.

There are two main types of energy contracts:

Fixed-term contracts: With a fixed-term contract, you agree to purchase energy at a fixed rate for a set period of time, usually one to three years. This means that the price you pay for energy will not change during the contract period, regardless of any fluctuations in the market price of energy.

Variable contracts: With a variable contract, the price you pay for energy will vary depending on the market price of energy at any given time. This means that your energy costs could go up or down depending on market conditions.

When choosing an energy contract, it’s important to consider your business’s energy usage patterns, as well as your budget and risk tolerance. Fixed-term contracts can provide price stability and budget certainty, while variable contracts can offer more flexibility and potentially lower costs if market conditions are favorable.

It’s also important to review the terms and conditions of any energy contract carefully, and to negotiate with suppliers to get the best possible deal for your business. Some suppliers may offer incentives or discounts for signing long-term contracts, or for bundling multiple energy services such as electricity and gas.

Overall, understanding how energy contracts work can help you make informed decisions about their energy usage and costs, and can potentially lead to significant savings over time.

Are your energy contracts coming up for renewal?

If so, our Energy Consultants can help you. The first step is to get in touch with us and we will call you to discuss your current contract, what you’re looking for and help you find a solution.