Flexible Energy Contracts:
Flexible energy contracts are usually considered a more advanced approach to purchasing energy. Rather than ‘Fixing’ your costs for a specific duration with one single agreement, Flexible Contracts allow you to engage with multiple, smaller purchases direct from the wholesale market. This could see you benefit from wider opportunities to monitor the market and purchase energy at optimum times throughout the year. This strategical approach is suited to customers who have a larger energy spend (often beginning at around £500k per annum), or for a consortium of businesses who collectively basket their consumption together to try and accumulate their volume and enhance overall purchasing power (See our basket/consortium overview for more detail).
In negotiating your Flexible Energy Contract, your total volume is broken down into smaller segments of energy, often known as clips. These clips are then purchased individually and can be purchased monthly, quarterly or seasonally in advance of usage. Once the clips have been traded, you then have an agreed amount of energy to use within that month, quarter or season and any over use would then be traded as additional, or settled against the market index.
Throughout the contract, usage is likely to differ from your pre-purchased clip volume, depending on the consistency of the business operations and the energy monitoring tools available, however volume fluctuation is common and can, but doesn’t always mean excessive costs. It is important to make sure you’re on the right product to minimise unexpected costs, as this is the key to the success of Flexible Purchasing. Whilst the cheapest costs can appear attractive when negotiating initial clip volumes, heavy costs associated with residual trades or market settlement need to be considered to ensure accurate forecast projections.
As with Fixed Energy Contracts, you can still ‘Fix’ or ‘Pass Through’ certain elements of your energy cost within a Flexible agreement, however this may need to be agreed as part of initial negotiations as amendments to the contract can sometimes incur additional costs, which may erode some of the financial benefits gained through trading.
It’s important to note that not all suppliers offer Flexible Energy Contracts, and not all provide the tools which are required to monitor the market and maximise the benefits from more intelligent purchasing. The key is to understand what suppliers offer what services and where the best fit might be for your business and its individual energy needs.
At EE-S, we work with all leading suppliers who offer Flexible Energy Contracts, and can ensure you are directed to the suppliers who are most equipped to provide the service and support you’re looking for.
To understand more about how we approach the market and how this can benefit you and your business, get in touch to speak with one of our experts who can support with a comprehensive market review today!