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Business Energy Contracts Explained: Fixed vs Standard Pricing 

Understanding the Difference Between Standard and Fixed Energy Contracts
When comparing Corona Energy contracts, it is important to understand the differences between Standard and Fixed pricing, particularly how non-commodity charges are treated and the impact these can have on your overall energy costs.

Standard Contracts – Lower Initial Rates, Greater Exposure to Increases
Standard contracts generally offer a lower initial unit rate, but certain charges remain variable and may increase during the contract period.

Key Features:

• Non-Commodity Charges: The quoted unit rate includes forecast costs for Distribution (DUoS), Transmission (TNUoS), Renewables Obligation (RO), Feed-in Tariff (FiT), Balancing Services (BSUoS), Contracts for Difference (CfD) and Capacity Market (CM).
• 
  Pass-Through Costs: If actual industry costs exceed the amounts originally forecast, Corona Energy may pass these additional charges on to the customer.

 

• Variable Standing Charge: Standing charges are not fully fixed and may change during the contract term, creating additional uncertainty.

Advantages:

• Generally lower initial unit rates.
  Potential savings if non-commodity charges remain within forecasts.

Disadvantages:

• Exposure to increases in industry and network charges.
  Standing charges can fluctuate.
  Less certainty when forecasting future energy expenditure.
• Fixed Contracts – Greater Price Certainty and Budget Protection
• Fixed contracts offer greater protection against changes in energy costs by securing both the unit rate and standing charge for the agreed contract period.

Key Features:

Fixed Unit Rate: The agreed unit rate remains fixed throughout the contract term, providing protection against increases in the costs included within the fixed price.
Fixed Standing Charge: The standing charge is also secured for the duration of the agreement.
Limited Pass-Through Exposure: While most existing industry charges are incorporated into the fixed price, new regulatory charges, taxes or changes in legislation may still be passed through where permitted under the contract terms.

Advantages:

• Greater protection against future increases in non-commodity charges.
• Predictable unit rates and standing charges.
• Improved budgeting and financial planning.
• Reduced exposure to unexpected industry cost increases.

Disadvantages:

Typically higher initial rates, reflecting the additional price protection.
Customers may pay a premium for certainty, even if variable industry costs remain stable.

⚖️ Which Contract Is Better?
The key consideration is the balance between initial price and long-term cost certainty.

A Standard contract may appear more competitive initially, but the final cost could increase if network and industry charges rise above current forecasts.

A Fixed contract generally carries a higher initial price but provides greater certainty over the contract period, making it easier to manage budgets and protect against unforeseen increases.

Our View

With non-commodity charges continuing to place upward pressure on business electricity costs, we believe that the additional protection offered by a Fixed contract is worth considering.

However, the decision should ultimately be based on the overall quoted costs, the level of protection provided and your business's appetite for future price fluctuations.

Please note: The precise treatment of pass-through charges and permitted price adjustments will depend on Corona Energy's specific contractual terms and conditions.