Business energy contracts explained

Business energy works differently from household energy. There is no Ofgem price cap and no cooling-off period, so the contract you sign (or are placed on) matters a great deal. This page is the overview: it names every contract type you are likely to meet, shows how they compare and points to the detailed guides.

The six contract types at a glance

Type	How the price behaves	Typical situation
Fixed-term, fixed price	Unit rate and standing charge fixed for the term (some other charges may still move)	You agreed a deal for one, two, three years or more
Variable	Supplier can change rates, usually with notice	No set end date, or a term with variable pricing
Flexible (tracker, basket)	Energy cost follows the wholesale market, either automatically or by buying in blocks	Larger or more engaged buyers
Deemed	Default rate set by the supplier	You moved in and did not agree a contract
Out-of-contract	Supplier's standard, usually higher, rates	Your fixed term ended and you did nothing
Rollover / evergreen	A new fixed term, or an open-ended arrangement, starts automatically	Your contract renewed without you choosing

Fixed-term, fixed-price contracts

Most small businesses use these. You agree a unit rate (pence per kWh) and a standing charge (pence per day) for a set period. Your price for the energy itself is protected if wholesale markets rise. You are also stuck with the price if the market falls, and leaving early usually triggers a termination fee. Read fixed vs flexible contracts for the full trade-off.

Watch the small print: "fixed" often applies only to the energy element. Some quotes let the supplier pass through changes in network, policy or tax costs. See pass-through vs fixed charges in a quote.

Variable contracts

With a variable contract the supplier can change your rates during the term, subject to the notice in your terms. Variable rates are not a guaranteed discount to anything. They can suit a short gap while you decide, but they should not be a long-term default.

Flexible contracts

Flexible products let you buy energy ahead in blocks or track the wholesale market, instead of locking everything in on one day. They give you more say, and more exposure to price swings. They tend to suit businesses with significant, predictable usage and someone who will manage them. Terms you may meet include tracker, basket purchasing and blend and extend.

Deemed contracts

If you move into premises and use gas or electricity without agreeing a contract, the supplier for that meter can put you on a deemed contract. Ofgem notes that deemed rates can change more often than fixed rates, and you can choose a proper contract at any point. You cannot be charged a termination fee to leave. See deemed contracts and moving premises.

Out-of-contract rates

When a fixed term ends and nothing replaces it, you may fall onto the supplier's out-of-contract rates. Suppliers cannot charge a termination fee to out-of-contract customers, and they cannot make a microbusiness give notice to leave (apart from evergreen contracts, which can require up to 30 days). The cost can be much higher. A comparison-site snapshot (Moneysupermarket Business, 21 October 2026) put average out-of-contract electricity at around 40.0p/kWh against 28.4p/kWh for an average fixed micro-business deal. Treat that as indicative only. Use our out-of-contract cost calculator to size the difference for you.

Rollovers and evergreen contracts

A rollover is when your supplier renews you onto a fresh fixed term automatically. For microbusinesses, a rollover is only allowed if the supplier has sent the required renewal information and you have not given notice to stop it, and the new term cannot exceed 12 months. An evergreen contract has no fixed end date and rolls on until either side gives notice. Details are in our rollover guide.

What sits inside the price in any contract

Ofgem explains that business prices combine wholesale energy, network charges, government scheme costs, taxes, any third-party (broker) fee and the supplier's own costs, usually expressed as a unit rate plus a standing charge. Because the mix differs by supplier and contract, two quotes can look similar and behave very differently. Look at non-commodity charges and standing charges before comparing.

Worked example: comparing two quotes on cost

A shop uses 20,000 kWh of electricity a year.

• Quote A: 27.0p/kWh and 60p/day. Cost: 20,000 x £0.27 = £5,400; 365 x £0.60 = £219; total £5,619 before VAT.
• Quote B: 26.0p/kWh and 120p/day. Cost: 20,000 x £0.26 = £5,200; 365 x £1.20 = £438; total £5,638 before VAT.

The lower unit rate in B is outweighed by the higher standing charge. Always compare annual totals. Our business energy cost calculator does these sums for you. VAT and the Climate Change Levy come on top: the levy is 0.801p/kWh from 1 April 2026 unless an exemption applies, and VAT is normally 20%.

Checks before you agree to any contract

• Is the price fixed, and which elements can still change?
• How long is the term and when does it end? Is there a rollover?
• What is the termination fee, and does it apply if you move premises?
• Does the quote show any broker cost? Look at the Principal Terms, the key terms every supplier must give you.
• What happens if your usage is lower or higher than the estimate?

A verbal agreement can be binding, and there is no cooling-off period after you agree. Read the terms first. Our contract terms checklist goes through each clause.

Common mistakes with business energy contracts

• Ignoring the end date. The most expensive mistake is drifting onto out-of-contract or rollover rates because no one noticed a letter.
• Comparing unit rates only. As the example shows, standing charges can reverse the ranking.
• Assuming a "business" rate is a discount. Business supplies carry 20% VAT and the Climate Change Levy, which household supplies do not, so do not assume a business tariff is cheap.
• Treating a broker as free. Broker pay can be built into your rates; the total should appear in the Principal Terms.
• Using a domestic contract for business premises. Premises used to trade normally need a business contract. If you work from home, ask your supplier whether your use changes the type of contract you need.

Average prices for context

The government's Quarterly Energy Prices release (September 2026) put the average non-domestic price in the second quarter of 2026 at 24.51p/kWh for electricity and 5.28p/kWh for gas, both including the Climate Change Levy. These are averages across all sizes of user, so your own quotes may sit well above or below them.

Next steps

• Find your contract end date on your contract, Principal Terms or latest bill.
• Check your size for extra protections: what is a microbusiness?
• Plan ahead for your next renewal.

Biz Energy is independent and does not sell contracts or take commission.