Flexible contract

What it is

With a flexible contract, the energy for your site is bought in several purchases over a period of time, either by you, a broker or the supplier. Your unit rate is the average of what was bought, plus the supplier's costs. It sits between a fixed rate contract, where the price is set at signing, and a tracker tariff, where the price follows the market.

Where you will see it

It is typically offered to larger or half-hourly metered sites. Arrangements differ between suppliers, so read the Principal Terms and any trading policy: who decides when to buy, how much you may buy at once, and what is left unpriced at the end.

Why it matters

The upside is that you avoid fixing everything at a peak. The downside is that nobody can predict the market, you carry the risk of buying at a high point, and decisions may need time and attention. If the contract expires with energy unpurchased, the remainder is often priced at the then market, which could be high.

Example

Illustrative figures. A site buys 50,000 kWh of its year's electricity in each of four purchases at 24p, 27p, 22p and 26p. The average is (24 + 27 + 22 + 26) ÷ 4 = 24.75p/kWh. If a single fixed purchase at the start would have been 26p, flexible saves 1.25p on 200,000 kWh: 200,000 × £0.0125 = £2,500. Had the four prices been 28p, 30p, 27p and 29p, the average of 28.5p would cost 2.5p × 200,000 = £5,000 more than 26p.

Flexibility is not a promise of lower prices. For a small premises with steady use, a fixed deal is often simpler to budget.

Related terms

See fixed vs flexible contracts, pass-through and half-hourly meter.