What kind of fixed 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.

To illustrate how SSE’s fixed contract products compare see below:

  • SSE Protect

A fully fixed price – ideal for businesses that want fully fixed costs for the total contract period. More details for this SSE product an be found HERE.

  • SSE Choice

Energy costs are fixed to shield businesses from wholesale market fluctuation but non-commodity costs can change in line with market movements. Energy costs are fixed for the full contract duration, whilst non-commodity costs are fixed at forecast levels. This means that, after completion of SSE’s acceptance process, SSE may increase the price should market conditions change.
SSE have the option to reconcile on the contract annually, depending on the changes in the market.

SSE are very confident in their 12 month forecast, however, as the forecast goes out further, there are more factors that can affect the prices.

The reconcile should work both ways, if there is a sharp drop in any of the non-commodity costs that SSE advertise, then SSE would reconcile back to the customer and vice versa if there is a rise.


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. SSE assure Direct Power that their Choice Product will work both ways, i.e. they will also reconcile and reimburse a client mid-contract when their forecast was to high.

If you have any questions regarding contract types, please do not hesitate to get in contact with Direct Power for some guidance.

Is your contract Fixed?