Fixed vs. Variable Rate Energy Contracts: Pros and Cons

Fixed vs. Variable Rate Energy Contracts: Pros and Cons

Finding the right energy contract for your business’s gas and electric supply can be challenging. It’s crucial to understand the available options and make an informed decision that aligns with your specific needs. At Switch365, we specialise in assisting business customers to secure the best rates for gas and electric. In this guide, we will explore the pros and cons of fixed and variable rate energy contracts, empowering you to make a well-informed decision that optimises your energy costs.

Pros of Fixed and Variable Rate Energy Contracts

Price Stability (Fixed): With a fixed rate contract, your energy prices remain constant throughout the contract term, shielding your business from market fluctuations. This makes budgeting and financial planning more predictable.

Long-Term Cost Control (Fixed): You have a clear understanding of your energy costs, allowing you to allocate resources efficiently and forecast expenses accurately.

Market Advantage (Variable): Variable rate contracts allow you to take advantage of potential decreases in energy prices when the market is favourable, leading to significant savings, especially during periods of low energy costs.

Short-Term Flexibility (Variable): Variable rate contracts offer the flexibility to switch to a different contract or supplier without incurring early termination fees, allowing you to adapt to changing market conditions or business requirements.

Cons of Fixed and Variable Rate Energy Contracts

Potentially Higher Initial Costs (Fixed): Fixed rate contracts may have higher rates compared to variable rate contracts, particularly during periods of low energy prices. However, it's important to consider the long-term cost benefits in relation to your business’s specific energy consumption patterns.

Price Volatility (Variable): Energy prices can fluctuate significantly under a variable rate contract, potentially leading to unpredictability in your energy bills. This may make budgeting more challenging, particularly if there are sharp price increases.

Risk of Higher Costs (Variable): During periods of high energy prices, variable rate contracts can result in higher costs compared to fixed rate contracts. It’s essential to assess your risk tolerance and the energy market trends when considering this option.

Making the Right Choice for Your Business

Choosing between a fixed rate and a variable rate contract for your business gas and electric supply requires careful consideration. At Switch365, we can help you navigate these options and secure the best rates for your specific needs. Whether you’re interested in the stability of a fixed rate business gas or electric contract or the flexibility of a variable energy contract, our team is here to guide you.

Understanding Government Support:

Energy Bill Discount Scheme (EBDS):
If your business is eligible for the Energy Bill Discount Scheme (EBDS), you will benefit from reduced costs. However, the overall government funding for this scheme has been significantly reduced compared to the previous Energy Bill Relief Scheme.

At Switch365, we understand the importance of cost savings for businesses. We offer not only renewable and green energy solutions but also keep you informed about government schemes like the EBDS. By switching or renewing with our team, we can help you find the most cost-effective deal for your business and make vital savings on your merchant services.