Is a Fixed or Variable Business Energy Tariff Better for Your Company?

When it comes to choosing a business energy tariff, one of the biggest decisions you’ll face is whether to opt for a fixed or variable rate. Each option has its advantages and drawbacks, and the right choice depends on your company’s energy usage, budget, and risk tolerance. In this guide, we’ll break down both tariff types and help you decide which suits your business best.

What is a Fixed Business Energy Tariff?

A fixed tariff means that your electricity or gas unit price is locked in for a set period, usually between 12 and 36 months. While your actual energy bill will still vary depending on consumption, the unit price remains unchanged.

Pros of a Fixed Tariff:

✅ Price Stability: You’re protected from market fluctuations, making budgeting easier.
✅ Protection from Price Increases: If wholesale energy prices rise, your rate stays the same.
✅ Easier Forecasting: Predictable costs help businesses with long-term financial planning.

Cons of a Fixed Tariff:

❌ No Benefit from Price Drops: If market prices fall, you’re locked into a higher rate.
❌ Exit Fees: Breaking a fixed contract early may result in penalties.
❌ Potentially Higher Initial Rate: Fixed rates are often set slightly higher than variable rates to account for future price fluctuations.

What is a Variable Business Energy Tariff?

A variable tariff means your energy price changes in line with wholesale market rates. This means your business can benefit from price drops but is also exposed to potential increases.

Pros of a Variable Tariff:

✅ Potential for Lower Costs: If wholesale prices fall, your business will save money.
✅ More Flexibility: Typically, variable tariffs do not have exit fees, allowing you to switch suppliers more easily.
✅ Short-Term Savings: If energy prices are predicted to drop, a variable rate could be the better option in the short term.

Cons of a Variable Tariff:

❌ Price Volatility: Your energy costs can fluctuate, making budgeting more difficult.
❌ Higher Risk: If prices rise sharply, your business will have to absorb the additional costs.
❌ Uncertainty in Long-Term Planning: Difficult to predict future expenses accurately.

Which Tariff is Right for Your Business?

The best choice depends on your business’s specific needs:

🔹 Choose a Fixed Tariff If:

• Your business requires budget certainty.

• You want to avoid the risk of price increases.

• You prefer long-term price stability.

🔹 Choose a Variable Tariff If:

• Your business can handle some fluctuation in energy costs.

• You want to take advantage of potential price drops.

• You need flexibility to switch suppliers easily.