When it comes to renewing your club’s business energy contract, one of the biggest decisions is whether to choose a fixed or flexible contract.
Understanding how fixed and flexible energy contracts work can help you make a more informed decision about which approach is right for your club.
What Is a Fixed Energy Contract?
A fixed energy contract allows you to agree certain energy costs for a set contract period, typically by securing the wholesale element of your energy price in advance. This can give your club greater certainty over the price you will pay for the energy itself and make budgeting easier, as you have more protection against movements in the wholesale market during your contract.
However, it’s important to understand that “fixed” doesn’t necessarily mean your entire energy bill will stay exactly the same. Your overall bill will still depend on how much energy your club uses, while some non-energy charges, taxes and other third-party costs may also change depending on the terms of your contract.
Who Could a Fixed Energy Contract Suit?
Fixed contracts can be particularly useful for clubs that value budget certainty and simplicity.
If your club operates to a relatively strict annual budget, knowing more about what your energy is likely to cost can make financial planning easier. A fixed approach can also suit clubs with a lower appetite for risk, as you are less exposed to short-term movements in wholesale energy prices once your price has been secured.
The trade-off is that fixing your price can also mean you don’t benefit in the same way if wholesale energy prices subsequently fall. Whether fixing represents the right decision therefore depends heavily on your club’s circumstances, the contract available and the market conditions when you agree it.
What Is a Flexible Energy Contract?
Rather than purchasing all of your energy at one point in time, a flexible energy contract allows energy to be purchased at different points throughout the contract period.
This provides greater exposure to movements in the wholesale energy market and can give clubs opportunities to take advantage of favourable market conditions rather than committing to one price on one day.
Flexible contracts can vary considerably in how they are structured and managed, so it’s important to understand exactly how a particular contract works before deciding whether it is suitable for your club.
Who Could a Flexible Energy Contract Suit?
A flexible approach may be more appropriate for clubs that are comfortable with a greater degree of price movement and want more control over when their energy is purchased,
Your club’s risk appetite is an important consideration here. While flexible purchasing can provide opportunities when wholesale prices fall, it also means accepting greater exposure if the market moves in the opposite direction.
Flexible contracts can also require more active management and may be better suited to clubs with sufficient energy consumption and the ability to take a longer-term, strategic approach to purchasing.
Again, there is no guarantee that a flexible contract will result in lower costs. Its suitability depends on your club’s circumstances, consumption profile, purchasing strategy and market conditions.
What One Should Your Club Choose?
Choosing between fixed and flexible energy shouldn’t simply come down to which option appears cheapest when you receive a quote.
Think about how much certainty your club needs when setting budgets, how comfortable you are with energy prices changing over time and how actively you want your energy purchasing to be managed.
Contract length and timing can also make a significant difference. Energy markets move constantly, which means an approach that makes sense for one club — or even for the same club at one point in time — may not necessarily be the right choice in different circumstances.
That’s why it’s important to look at the wider picture rather than viewing either fixed or flexible purchasing as inherently better than the other.
Not sure which energy contract is right for your club? There are benefits and considerations to both fixed and flexible energy contracts, and the most suitable option will depend on your club’s individual circumstances.
At Club Assure, we can help you understand the options available, consider your club’s energy usage and appetite for risk, and make sense of current market conditions before you commit to your next contract.
Not sure whether fixed or flexible energy is right for your club? Speak to our energy experts today and we’ll help you explore your options.
