Business energy, it’s not the most glamorous of subjects to talk about, is it? Like most, it’s something you probably take a quick look at near the end of each contract then put it to the back of your mind until it expires in a few years’ time.
Most people assume that once you’ve signed your deal and the price is agreed, you’re tied to this until your contract comes to an end. However, this doesn’t have to be the case.
Barely a day goes by that we don’t speak to a business concerned their current energy bills are too high. Unfortunately, they often have numerous years left on an existing fixed-rate contract, leaving them incapable of acting.
It’s impossible to predict the energy market, which makes it extremely difficult to ensure that the fixed contract you are on will continue to be the best price throughout the duration of your term.
One of the saddest things about this predicament is that it doesn’t always have to be the case. There is an option for many businesses (especially high energy consumers), offered by energy supplier ENGIE (and Total Gas & Power for gas only), which is called a “blend and extend clause”. Understanding how this works will go a long way in helping you reduce those ever-rising operational costs.
What is blend and extend?
A blend and extend plan allows you to purchase energy in a way that enables you to save money now and spread the cost of energy out over a longer period. This is only an option if you’re in a deregulated market or buy energy from a third-party supplier (a wholesaler or energy broker etc.) via ENGIE or Total Gas & Power (gas only).
When companies are on a fixed-rate contract but the wholesale price of energy falls, many are left wondering, how can they take advantage of the lower prices? With a Blend and Extend clause, a business has the option to renegotiate their deal every year and, should prices drop sufficiently, extend their current agreement on reduced rates.
How does it work?
Sounds appealing, doesn’t it? Let’s break things down further and look at two differing scenarios, and how each can put a blend and extend clause into practice.
Scenario A – You are two years into your five-year contract and, since agreeing terms, the wholesale price of energy has fallen significantly. The thought of paying over the odds for a further three years fills you with dread.
With a blend and extend plan, you can now take advantage of the lower costs even though you are still under contract. By extending the original agreement by an additional two years, today’s lower rates are blended with the original contract rates to reduce your energy bills immediately.
Example:
- You currently pay 14p per meter.
- The average rate two years later is now 12p per meter.
- You extend your current contract by two years and commence your new five-year deal at the new rate of 12p per meter.
Scenario B – You’re two years into your contract and the price of wholesale energy has increased significantly. Despite this, you’re still paying way below the industry average.
So, what do you do at the end of the year? It’s easy, you do nothing! You simply choose not to negotiate your contract and remain on your existing terms. Due to the nature of your contract, you’ll be protected at these prices for the duration of your deal.
As the buyer, it’s strictly your decision to renegotiate terms.
How can GAS help?
With our team of dedicated, experienced energy specialists, we’re one of the few businesses with the ability to negotiate a blend and extend clause into your contract.
Our team can carry out a thorough investigation into your current energy needs and identify whether you are eligible or not.
Simply get in touch today on 0800 130 3514 or drop us an email and we’ll be in touch.
