More choice, whilst adding more confusion for SME customers…
What kind of fixed Drax contract do you want?
Historically gas and electricity contracts have fallen into two key categories: Fixed or Non-Fixed (aka Pass Through). The key difference being that Fixed contracts offer price certainty, whilst Non-Fixed (aka Pass Through) contracts are subject to price variation. To learn more about these options read here.
As if the choice wasn’t confusing enough, Suppliers are increasingly offering what you could refer to as “Semi-Fixed” offers. i.e. the price is fixed based upon a supplier’s best guess forecast, with the option that the supplier may re-visit prices should their forecast prove to be incorrect. Suppliers don’t always make the subtleties of the ‘semi-fixed’ contract instantly obvious, which makes comparing offers on a like-for-like basis very difficult.
One supplier, amongst many, to offer an array of Fixed, Semi-Fixed and Fully Flexible contracts is Drax. See below for more information on how Drax’s SME Fixed and Semi-Fixed contracts compare:
Drax Contract – Complete: A fully fixed price – ideal for businesses that want fully fixed costs for the total contract period. The supplier assumes all the pricing risk, so the customer has peace of mind.
Drax Contract – Standard: The charges on the bill cover fixed, pass-through, or set at threshold elements of cost, meaning prices may change mid-contract. Essentially the price risk is shared between the supplier and customer resulting in cheaper contract rates, but only time will tell to see if they are cheaper than fixed by the end of the contract duration, as rates may change mid-contract. The current split of elements between Fixed, Pass Through and Threshold are summarised below:
- Fixed – Energy costs are fixed to shield businesses from wholesale market fluctuation, Distribution and Transmission Losses are also fixed.
- Pass Through – Contracts for Difference (CfD), Capacity Market (CM) are charged to client at pass through levels.
- Set at Threshold – elements of cost that are subject to increase if Haven’s prediction is set too low include; Renewables Obligation (RO), Feed in Tariff (FiT), Transmission Network Use of System charges (TNUoS), Distribution Use of System charges (DUoS), Balancing Use of System charges (BSUoS).
(TNUoS)
Given that it is harder to predict accurate third party thresholds on longer term contracts, the longer term Drax Standard contract has more opportunity for the supplier to change prices mid-contract.
In Conclusion…
Always read the fine print of the contract or ask your account manager to address any questions you may have before signing. Re-opening contract prices mid-term takes time, damages reputations, and costs money for a supplier to manage. It is realistic to expect suppliers to only enact a mid-contract price adjustment with the positives outweigh the negatives for them. i.e. when they under-forecast so much that it is worth the burden of altering prices mid-term. If you have any questions regarding a Drax contract type, or from any other supplier, please do not hesitate to get in contact with Direct Power for some guidance.
