Flexible Utility Contracts - The Benefits in a Post Covid World
We look at flexible utility contracts and how companies can better manage their energy procurement in a post covid world.
The one thing COVID-19 has given us all is uncertainty, particularly in our business operations…and fixed-price energy contracts are next for the uncertain list. Flexibility is the future.
Pre-Covid, fixed-price energy contracts were what they said they were, fixed! Plus, they were the norm for industrial and commercial businesses. However, it looks likely that these will get more expensive and become less ‘fixed’ than consumers believe. We will all need to get on board with flexible contracts.
Could this be the end of fixed price energy contracts
Fixed-price contracts currently carry a 10 per cent price premium in compared to flexible contracts. Next year we predict that the premium will rise to 15 – 17 per cent, and beyond 20 per cent from 2022.
Why? Because the ongoing uncertainty around home versus office working, combined with suppliers having to recoup commodity losses and deferred non-commodity costs, such as balancing and network charges, is already starting to take its toll. Fixed-price contracts will probably disappear altogether as suppliers struggle to predict consumption patterns and attempt to insulate themselves from risk.
Even if typical fixed-price contracts remain, they will probably look very different because there are too many unknowns for suppliers to price them accurately, so they are doing everything possible to de-risk contracts. Credit requirements are also going up and some suppliers are not pricing for certain industries without an upfront deposit or a significant price premium.
Flexible contracts will be the future, because suppliers can use terms and conditions to reopen contracts and claw back money from customers. Businesses will increasingly benefit from taking flexible contracts, he says, even in their most basic form.
Visibility of energy spend is key to reaping the benefits of flexible utility contracts. EaaSi is the UK’s only cloud based integrated digital platform to fully automate and validate your energy spend management across all departments, locations and energy output feeds. EaaSi uses RPA to provide a fully automated energy spend management platform delivering insights to businesses on utility bills and the data associated to your meter end points instantaneously.
About Catalyst Commercial Services
Catalyst is a market leading independent energy consultancy that provides energy procurement, sustainability and environmental services. Catalyst is one of the leading providers of utility purchasing and contract negotiation services to the commercial sector. With over 15 years’ experience in this dynamic market, the team of energy market professionals provide a full options appraisal for business utility contract needs.
