Types of business energy contract

Business energy contracts come in more varieties than household tariffs, and the names are not always used consistently. Some you choose when you agree a deal. Others apply automatically when you have not agreed one.

Knowing which type you are on tells you what you pay, whether your price can change, and when you can leave. This guide gives you a short explanation of each, a table to compare them, and links to our detailed guides.

What are the main types of business energy contract?

There are four types you choose (fixed, fixed with pass-through charges, variable and flexible) and four arrangements that apply when you have not agreed a new fixed deal (deemed, out-of-contract, rollover and evergreen).

Type	How you get it	Price during the term	Can you leave without a fee?	Tends to suit
Fixed	You choose it	Set unit rate for the term, with limited exceptions	At the end date	Most small and medium businesses
Fixed with pass-through	You choose it	Energy price fixed, some non-energy costs can change	At the end date	Medium and larger businesses
Variable	You choose it, or you are moved onto it	Can go up or down	Depends on terms	Short-term needs
Flexible	You choose it	Built up from purchases made over time	At the end date	Large and multi-site users
Deemed	Applies when no contract covers your supply	Supplier’s deemed rates	Yes, any time	Nobody for long
Out-of-contract	Applies when your fixed term ends	Rates set by your old contract	Microbusinesses: yes. Others: check terms	Nobody for long
Rollover	Starts automatically at the end of a fixed term	New fixed rates set by the supplier	Microbusinesses: yes. Others: check terms	Nobody who has not chosen it
Evergreen	Open-ended contract with no end date	Set by the contract	Microbusinesses: yes, with up to 30 days’ notice	Businesses wanting a rolling deal

What is a fixed-rate contract?

A fixed-rate contract charges a set price for each unit of energy for the length of the contract. Ofgem describes it as paying “a fixed price for each unit of energy you use” for the contract’s length, even if market prices change.

Two points are easy to miss:

• It fixes the unit price, not your bill. Your bill still rises and falls with how much you use.
• Some fixed contracts can still change. Ofgem notes some contracts allow rate changes in certain conditions. EDF’s small business terms (June 2026 edition), for example, only allow price increases during the fixed term if you break the contract, or if a new or higher cost of distributing, transporting or supplying energy directly affects EDF’s costs of supplying you.

Read the principal terms to see exactly what is fixed. Our guide to fixed vs flexible contracts goes into more detail.

What is a fixed contract with pass-through charges?

The energy part of the price is agreed up front, but some other costs are passed through to you and can change during the contract. The 2022 advice from Ofgem, Citizens Advice, Advice Direct Scotland and Energy UK describes these as charges “added to the energy price when the charges are known” by suppliers, and suggests you check whether your price can vary during the term.

Ofgem’s business glossary explains that the wholesale cost of energy is about half of a typical bill. The rest is non-commodity costs, such as network charges, environmental and social scheme costs, supplier operating costs and margin. Some contracts build estimates of these into a fixed price. Others pass them through at cost.

Larger suppliers often let you choose. EDF, for example, lets large business customers on flexible contracts choose to fix third-party costs or manage them with variable options.

What is a variable contract?

On a variable contract, what you pay for each unit can change during the contract. Ofgem says you “will pay different amounts for the energy you use based on the cost of energy”, so your payments can go up or down.

That makes budgeting harder, so a variable contract tends to suit a short-term need, such as a business that expects to move soon. Several suppliers also use a variable tariff as the default when a fixed contract ends:

• British Gas moves customers who do not renew to its Variable Price Plan.
• EDF automatically transfers small business customers to a variable tariff at the end of the fixed term, unless they switch or agree a new contract.
• Octopus Energy for Business moves supply to its standard variable tariff after the end date.

What is a flexible contract?

A flexible contract buys your energy in several purchases over time instead of all at once, so your price is built up from those purchases. EDF describes its flexible contracts as letting you “choose how and when you want to purchase energy”, buying in blocks or in full.

Flexible contracts are aimed at large users. British Gas offers Flex Advantage to organisations using over 1 GWh a year, buying in 20% tranches, and its Full Flex and Flex Cash Out products to organisations using over 10 GWh a year.

They give more control over timing, but less budget certainty, and someone has to manage the buying. See our guides to fixed vs flexible contracts and multi-site business energy.

What is a deemed contract?

A deemed contract is the arrangement you are on when you use energy without an agreed contract. Ofgem says you will be placed on one “when you move into a new business premises and use electricity or gas before agreeing a contract with a supplier”. Its glossary adds that one can also arise when a contract ends without saying what happens next.

Deemed rates are set by the supplier and are usually high. But the supply licence says a deemed contract must not have a fixed term, a termination fee or a notice requirement, so you can leave at any time. Our deemed contracts guide explains more.

What are out-of-contract rates?

Out-of-contract rates are what you pay when your fixed term ends and your contract says what happens next. Ofgem says they are “different to a deemed contract”.

If you are a microbusiness, you can switch away from out-of-contract terms at any time, with no termination fee and no notice. Larger businesses should check their contract. Our out-of-contract rates guide shows where suppliers publish these rates.

What is a rollover contract?

A rollover contract is a further fixed term that starts automatically when your current one ends, if you have not agreed anything else. Ofgem’s glossary describes it as a contract where the supplier can extend the fixed term, or apply a new one, “without a customer’s positive assent”.

For microbusinesses, the supply licence limits a rollover to 12 months and only allows it if the supplier sent the required renewal information. During the rollover, a microbusiness can switch at any time without a fee. See our rollover contracts guide.

What is an evergreen contract?

An evergreen contract is open-ended: it has no fixed term and simply continues until you or the supplier end it. The supply licence defines an evergreen microbusiness contract as one of indefinite length with no fixed-term period, which is not an out-of-contract arrangement.

For microbusinesses, the notice period cannot be longer than 30 days and there is no termination fee. Ofgem kept the right to require notice on evergreen contracts in 2022 because it allows suppliers to offer rolling contracts at a lower cost than deemed or out-of-contract rates.

What other contract options are there?

These are less about the type of contract and more about what it covers:

• Single fuel or dual fuel. Ofgem says you will usually have a contract for each fuel. If your electricity and gas come from different suppliers, you get a separate bill for each.
• Renewable or green tariffs. Some contracts come with a renewable electricity claim. See our renewable business energy guide for how these claims work.
• Multi-site contracts. If you run several sites, our multi-site business energy guide covers the options for managing them together.
• Meter type. Your meter can affect which contracts are available. EDF’s terms, for example, say a product may not be available for your meter configuration. If you have a half-hourly meter, see our half-hourly meters guide.

How long do business energy contracts last?

Ofgem says business energy contracts can last for up to five years. It also says most suppliers will not let you switch before the end of the contract, so the length you pick decides how long you are committed.

A longer fixed term gives longer price certainty. A shorter one gives you more chances to re-quote. There is no cooling-off period, so choose the length before you agree.

How do you know which type of contract you are on?

Use this checklist:

1. Look at your latest bill. Check the tariff name for words such as “fixed”, “variable”, “deemed”, “default” or “out of contract”.
2. Check for an end date. A microbusiness on a fixed term must see its end date on every bill.
3. Find your contract or renewal letter. Microbusinesses receive a statement of renewal terms showing the end date and what happens if they do nothing.
4. Check how you started. If you moved in and never agreed a contract, you are probably on a deemed contract.
5. Ask your supplier. A supplier must take reasonable steps to give deemed customers the principal terms of their deemed contract, and microbusinesses must be sent a copy of their contract terms.

Once you know where you stand, you can compare business energy quotes for a contract type that suits you.

Frequently asked questions