Reasons why a business would choose a flexible contract instead of a fixed price contract…
Choosing between a flexible priced electricity contract and a fixed price contract depends on a business’s specific circumstances, risk tolerance, and market expectations. Here are some potential reasons why a business might prefer a flexible priced electricity contract over a fixed price contract:
- Market opportunities: A flexible priced electricity contract allows businesses to take advantage of potential cost savings during periods of low market prices. If the business expects electricity prices to decrease or if there are market conditions that could lead to lower prices, a flexible contract allows them to benefit from those fluctuations and potentially secure lower energy costs.
- Budget management: Some businesses prefer a flexible priced contract as it provides the opportunity to align energy costs with their overall budget management strategy. With a flexible contract, the business can adapt its energy consumption patterns based on market conditions, potentially optimizing its energy spend and better managing budget fluctuations.
- Risk management: A flexible priced contract transfers the market price risk from the supplier to the business. If the business has the capability to actively manage its energy consumption and has expertise in monitoring and analysing market trends, a flexible contract can provide opportunities to mitigate risk and potentially reduce overall energy costs. However, it’s important to note that a flexible contract also exposes the business to the risk of price increases in the market, which may require proactive risk management measures.
- Market insights and control: By choosing a flexible priced contract, businesses gain access to market insights and real-time pricing information. This allows them to make informed decisions about energy consumption, potentially optimizing usage patterns and identifying opportunities to reduce costs during periods of low market prices. Flexible contracts provide businesses with greater control and visibility over their energy management strategies.
- Environmental considerations: Some businesses may prioritize renewable energy consumption or reducing their carbon footprint. With a flexible priced contract, they may have the flexibility to choose energy suppliers or sources that align with their sustainability goals. This could include procuring electricity from renewable sources or supporting local renewable energy projects during times when renewable energy generation is high.
It’s important to note that choosing a flexible priced electricity contract requires active energy management, continuous monitoring of market conditions, and the ability to respond to price fluctuations. This approach may be more suitable for businesses with a higher risk appetite, the capacity to actively manage their energy consumption, and access to market expertise or energy management tools. Before making a decision, businesses should carefully assess their energy needs, consult with energy experts, and evaluate the potential benefits and risks associated with both flexible and fixed price contract options.
Fortunately for our customers, we offer Flexible style contracts that can be completely hands off. Our flexible customer have their contract managed by a professional commodity trader, so they get the benefits of the flexible contract without many of the drawbacks. Get in touch today to discuss how we can tailor a flexible contract solutions appropriate to your needs.
