Advantages of fully fixed contracts include: complete price certainty, easier forecasting and budgeting, minimal admin, no surprises in your existing bill, you pay a risk premium, no upward price adjustment, and less transparency over cost breakdowns.

Disadvantages include: you pay a risk premium, no upward price adjustment, and less transparency over cost breakdowns.

Advantages include: potentially lower base (if charges fall), full price transparency, the flexibility to respond for market signals, and environmental insight per charge.

Disadvantages include: charges can fluctuate, difficult to forecast annual budgets, exposure to volatile non-commodity charges, and you need actively monitor usage and markets.

In volatile market conditions: fully fixed gives you fixed notice, and pass-through deals are exposed to increases in non-commodity costs.

In stable markets: fully fixed offers a position, and pass-through may simply reflect existing changes.

In falling markets: you may feel trapped with fully fixed, and pass-through gives you the ability to savings.

Pass‑Through vs Fully Fixed Energy Contracts

Q: Who is a Fully Fixed Deal Suitable For?

Fully fixed contracts are suitable for businesses seeking cost certainty, companies with tight budgets, sites consuming large volumes where wholesale price-facing organisations where income aligns with energy costs, businesses that don't want to monitor market changes, and those with limited financial risk appetite, personal processes.

Q: What is a Pass-Through Energy Contract?

A pass-through contract separates your business electricity and gas electricity bill into two parts: fixed costs (often the wholesale cost) and pass-through costs (various third-party charges that may change throughout the contract term including non-commodity charges). This includes: transmission and distribution costs, capacity and balancing charges, environmental levies, metering and data charges, system losses, and supplier admin.

Q: Who is a Pass-Through Deal Suitable For?

Pass-through contracts are suitable for businesses comfortable with managing fluctuations, high-energy users with the flexibility to shift usage, businesses or services more in urban centers, companies that want more transparency over energy, companies that want to manage pass-through consumption, and large multi-site operations with energy management systems.

Q: Pass-Through vs Fully Fixed: Side-by-Side

A comparison table showing the differences between pass-through and fully fixed energy contracts across multiple features including: flexibility to market changes (None vs Higher), admin needed (Low vs Medium), price certainty (Lower vs Lower), transparency of costs (Lower vs Higher), risk level (Low vs Medium), suitable for SMEs (Yes vs Sometimes), and suitable for high-energy users (Yes vs Yes).

Energy costs are one of the biggest variables for British businesses, especially as wholesale markets continue to fluctuate. If you’re looking into how your business can manage that risk, you’ve probably come across two common contract types: pass‑through and fully fixed.

Both models offer benefits, but suit different risk appetites. This guide breaks down how each type of business energy contract works, what you’re actually paying for, and how to choose the best fit for your operations.

What is a Fully Fixed Energy Contract?

A fully fixed contract locks in the entire cost of your business electricity and gas for the duration of the agreement, which is usually 1 to 3 years. This model sets a single per kWh rate that covers:

Wholesale energy
Third‑party costs (network charges, green levies and balancing charges)
Supplier admin
Standing charges

Once fixed, your unit rate cannot be changed, even if non‑commodity costs rise during the contract term.

Who is a Fully Fixed Deal Suitable For?

Businesses needing cost certainty
Companies with tight budgets
Caregivers, childcare businesses, and public‑facing organisations where surprise bills are a concern
Businesses that don’t want to monitor market changes
Companies managing complex internal approval processes

Pros

Complete price stability
Easier forecasting and budgeting
Minimal admin
No surprises in your monthly bill

Cons

You pay a risk premium
No benefit if wholesale prices fall
Less transparency over cost breakdowns

What is a Pass-Through Energy Contract?

A pass‑through contract separates your business gas and electricity bill into two parts:

Fixed costs: often the wholesale rate
Pass‑through costs: variable third‑party charges that may change throughout the contract term

These variable elements can include:

Transmission and distribution costs
Capacity and balancing charges
Environmental levies
Metering and industry charges
System losses
Supplier admin

Who is a Pass-Through Deal Suitable For?

Businesses comfortable with monthly fluctuations
High‑energy users with the flexibility to shift usage
Businesses wanting more in-depth cost visibility
Companies with sustainability goals and the ability to manage peak‑time consumption
Large multi‑site operations with energy management systems

Pros

Potentially lower bills if charges fall
Transparency over industry costs
The flexibility to respond to market signals
Often cheaper than fully fixed

Cons

Bills fluctuate month‑to‑month
Difficult to forecast annual budgets
Exposure to volatile non‑commodity charges
You must actively monitor usage and markets

Pass-Through vs Fully Fixed: Side-by-Side

Feature	Fully Fixed	Pass‑Through
Budget certainty	Excellent	Limited
Exposure to market changes	None	Higher
Admin required	Lower	Higher
Transparency of costs	Lower	Higher
Potential savings	Lower	Higher
Risk level	Lower	Higher
Suitable for SMEs?	Yes	Sometimes
Suitable for high‑energy users?	Yes	Yes

Are Pass-Through or Fully Fixed Contracts Cheaper?

Unfortunately, there’s no universal cheap option. The costs your business would pay with each type of energy tariff depend entirely on timing and how markets change.

Fully fixed contracts may be cheaper when:

Non‑commodity charges are expected to rise
Market volatility is high
You secure your rate during a dip

Pass‑through contracts may be cheaper when:

Wholesale markets are stable or falling
You can manage peak usage
You’re willing to accept an element of risk

How Do Market Conditions Affect Each Contract Type?

Volatile Conditions

Fully fixed protects you from spikes
Pass‑through leaves you exposed to increases in non‑commodity costs

Stable Conditions

Fully fixed includes a premium
Pass-through rewards you with lower monthly charges

Falling Markets

You may feel trapped with fully fixed
Pass-through allows savings in this scenario

What Should Businesses Consider Before Choosing?

Here are the key questions to ask yourself before making a decision:

What is my risk appetite?
If volatility unsettles your budgeting, avoid pass‑through.
How predictable is my energy usage?
Consistent users benefit more from fixed.
Do I have energy‑intensive operations?
Pass‑through may enable cost‑saving.
Do I have the time to monitor markets?
Pass‑through requires active management.
Am I tendering for fixed‑price contracts?
Fully fixed is typically safer.

Should I Choose a Pass-Through or a Fully Fixed Tariff?

If your business values simplicity, certainty and a stable budget, a fully fixed contract is the safe, predictable option. If you’re comfortable managing some volatility and want transparency or the potential for savings, a pass‑through contract could work well, especially if your operations move with market conditions.

Both models can work well when matched to the right type of business. If you want a hybrid approach, some suppliers offer partially fixed contracts, providing a middle ground for business customers.