Blend and extend

What it is

In a blend and extend arrangement you mix the price from your existing contract with a current market price, and in return the contract is extended by more months or years. You end up with one new blended rate and a new end date.

Where you will see it

It is usually offered by a supplier or broker mid-contract, often when prices have risen or are about to. A new contract still needs Principal Terms, so the new rate, term and any broker cost should be spelled out. There is no cooling-off period for business contracts, so once agreed, you are locked in.

Why it matters

If your old rate is cheaper than today's market, blending raises your price for the old period in return for lower costs than a full reset. If the old rate is more expensive than today's, a blend may lower your price, but you could probably get that with a fresh quote anyway. Either way it ties you in for longer, and you lose flexibility. Ask whether you could simply wait for the renewal window and compare. See how early you can agree a new contract.

Worked example

Illustrative figures. You have 12 months left at 24p/kWh, and a new 24-month deal is available at 30p. If the supplier blends over the 36 months in total (12 at 24p and 24 at 30p), the average is (12 × 24 + 24 × 30) ÷ 36 = (288 + 720) ÷ 36 = 28p/kWh. The blended price applies to the full 36 months, so for the first 12 months you pay 4p more than the old rate (4p × annual use).

How a blend is calculated varies by supplier, so ask for the method in writing. A blend can hide the price you are really paying for the new period. Ask for the new rate with no blending, and compare.

Related terms

See what is blend and extend, fixed rate contract and business energy renewals.