What is blend and extend on a business energy contract?

How it works

Say your fixed contract has time left, and you want to change the price, perhaps because market prices have fallen below your rate. A supplier may offer to blend your current rate with a current market rate, and extend the contract so the blended price runs to a new, later end date. See also the glossary entry blend and extend.

It is a commercial arrangement offered at the supplier's discretion, not a right, and the term is market jargon rather than something Ofgem defines, so suppliers may structure it differently.

Worked example

A restaurant has 12 months left at 20p/kWh. The supplier offers to extend to a total of 36 months, with the extra 24 months priced at 30p/kWh. Assuming even usage, the blended rate is the weighted average:

(12 × 20 + 24 × 30) ÷ 36 = (240 + 720) ÷ 36 = 960 ÷ 36 = 26.7p/kWh.

The owner pays 26.7p from now, up from 20p for the next year. Is that worth it? Only if the owner believes prices will rise above that. These prices are made up for illustration.

When it can help, and when it can hurt

• May help: if the market has fallen since you signed and you want to benefit without waiting; or if you want certainty for longer.
• May hurt: if you're locked into a longer term at a price that later looks high, or if costs and fees are tucked into the new terms.

Questions to ask

1. What is the new total term and end date? See how to confirm your end date.
2. What is the new rate, and what are the exit fees?
3. Will I get updated Principal Terms showing the new rate, end date and any broker cost over the new term? We could not confirm that the rules require a fresh set for a variation, so ask for one in writing.
4. How does it compare with simply waiting and shopping around at renewal?

Compare the blended rate with a fresh quote for the same total period, not with your old rate alone.

Is it the same as renewing early?

Not exactly. Renewing early means signing a new contract that replaces the old one, usually with the supplier or a rival. Blend and extend modifies the contract you already have, with the same supplier. Either way the question for you is the same: what do I pay per kWh, for how long, and what does it cost to leave?

If you already know your end date, you can also compare the blended offer with leaving it and shopping around nearer the time.

Check the paperwork afterwards

Once agreed, you should receive revised terms showing the new rate, end date and exit fee. Compare them with what was offered on the phone. If anything differs, query it straight away, as there is no cooling-off period to fall back on.

Next steps

If you are unsure, ask for the proposal in writing and read fixed vs flexible contracts and the best time to switch.