Commercial energy UK 2026: the contract structures that catch buyers

The hardest part of buying commercial energy in the UK is not picking a supplier; it is choosing a contract structure. The same business, on the same MPAN, on the same day, can pay materially different amounts depending on whether the contract is fully-fixed, pass-through, peak/off-peak banded, capacity-managed or flex with a risk corridor. Ofgem's Q1 2026 non-domestic market data confirms that contract-structure choice now drives more cost variance than supplier choice for half-hourly meters.

TL;DR

Commercial energy contracts come in fixed, pass-through, flex with risk corridor, peak/off-peak banded and capacity-managed structures; each shifts a different risk between supplier and buyer.
The "evergreen" auto-rollover trap was banned for microbusinesses by Ofgem before 2022; larger non-microbusiness contracts still see rollover behaviour that can cost a buyer thousands.
The I&C boundary sits broadly at 100,000 kWh annual electricity consumption or a half-hourly metered site; below it, microbusiness and SME protections apply.
Deemed rates on change-of-tenancy contracts run 30-50% above the open market and bleed cash from day one.
Ofgem's energy advice for businesses page and the DESNZ energy prices statistics collection are the two primary references for SME and I&C buyers in 2026.

Last reviewed: May 2026

The five structures a UK commercial buyer can sign

A non-domestic energy contract in the UK is one of five structures, sometimes hybridised. A fully-fixed contract locks the unit rate and standing charge for the term, with the supplier absorbing wholesale movement and most non-commodity reconciliation risk. A pass-through contract fixes the wholesale energy component but passes through network, policy and balancing charges at actual cost, so the unit rate moves with non-commodity changes. A flex contract (sometimes called purchase-managed or risk-corridor) lets the buyer or a procurement agent buy wholesale energy in tranches across the contract term, against a defined risk corridor that caps maximum exposure. A peak/off-peak banded contract splits the unit rate by half-hourly time band, rewarding load-shifting to off-peak periods. A capacity-managed contract puts an Available Supply Capacity (ASC) figure on the meter and charges differently for capacity above or below the agreed kVA. Hybrid forms combine elements of two of the above, most commonly a fixed wholesale tranche paired with pass-through non-commodity, which Ofgem's non-domestic market documentation classifies under pass-through for reporting purposes. The choice of structure is the largest single lever a half-hourly buyer pulls in a procurement round.

Each structure transfers risk differently. A buyer signing fully-fixed buys certainty at a small risk premium; a buyer signing pass-through saves the premium but takes reconciliation volatility; a buyer signing flex outsources the buying decisions to a procurement specialist.

Most UK businesses leave structure choice to the broker by default.

The SME and I&C boundary

The Industrial & Commercial (I&C) versus SME distinction in UK non-domestic supply sits broadly at 100,000 kWh annual electricity consumption or a half-hourly metered (HH) site. Above that threshold, the meter typically reports half-hourly settlement data to the central settlement system, and the contract structures available expand from fully-fixed-only into flex, pass-through and capacity-managed options. Microbusiness is a narrower Ofgem-defined subset: fewer than 10 employees, under £2 million turnover, and either electricity under 100,000 kWh or gas under 293,000 kWh. Microbusiness contracts carry specific Ofgem protections (principal terms document, cooling-off equivalent, prohibitions on certain rollover behaviours). A typical UK SME with 30,000-80,000 kWh of electricity consumption sits between microbusiness and I&C; it gets fewer Ofgem protections than a microbusiness and fewer structural options than a half-hourly site.

Commercial energy contract structures, 2026

Structure	What is fixed	What is variable	Best fit	Risk to buyer
Fully-fixed	Unit rate and standing charge	Volume only	SME and small I&C wanting budget certainty	Low; pays risk premium
Pass-through	Wholesale energy component	Network, policy, balancing	I&C with reconciliation tolerance	Medium; non-commodity volatility
Flex (risk corridor)	Risk corridor caps maximum	Wholesale buying decisions	Large I&C with procurement support	Higher upside and downside
Peak/off-peak banded	Rate per time band	Time-of-use exposure	HH sites with load-shifting potential	Medium; depends on profile
Capacity-managed	Energy plus ASC kVA	Excess capacity charges	Sites with peak demand spikes	Excess-capacity penalty risk

Structure definitions reflect standard UK non-domestic supplier offerings and Ofgem's non-domestic market documentation as of May 2026.

The evergreen rollover trap and what changed

For decades, the standard UK commercial energy contract included an "evergreen" or auto-rollover clause: if the buyer did not serve notice within a defined window before contract end, the contract rolled into a new fixed term at a unilateral renewal rate, often 20-40% above the open market. Ofgem banned the practice for microbusiness contracts in the early 2020s and tightened renewal-window communication requirements. The catch is that the ban applies to microbusinesses specifically; non-microbusiness SMEs and I&C contracts can still include rollover or out-of-contract rate clauses that punish a buyer who misses a renewal date. A business with 120,000 kWh annual electricity consumption (above the microbusiness threshold) cannot rely on the microbusiness rollover ban; the contract terms govern, and many contracts still embed a renewal mechanism that the buyer must actively trigger or escape.

Read the renewal clause before signing, not before renewing.

Deemed rates: the change-of-tenancy bleed

When a business moves into premises without a contract in place, the incumbent supplier serves "deemed" supply at a deemed rate. Deemed rates are unilateral, not negotiated, and historically run 30-50% above the open-market equivalent for the same meter. Ofgem's microbusiness protections set boundaries on how a deemed contract must be communicated and how quickly a microbusiness can switch off it. For non-microbusiness sites, the deemed rate stands until the business signs a fixed contract. A business that takes possession of a unit on 1 March and signs a fixed contract on 1 May has paid two months of deemed pricing, which on a 50,000 kWh annual meter at a 50% deemed premium is roughly £900-£1,400 of avoidable cost. The fix is to sign a contract before or on the day of tenancy change, not after.

Half-hourly meters and capacity charging

Sites with peak demand at or above 100 kW are typically on half-hourly settlement metering, which reports actual consumption in every half-hour period to the central settlement system. Half-hourly meters carry capacity charges based on Available Supply Capacity (ASC) measured in kVA. If a site exceeds its ASC, excess capacity charges apply and can be material. A site that historically peaked at 150 kVA but has grown to peak at 200 kVA will accumulate excess capacity charges until the ASC is renegotiated with the DNO. The fix is annual ASC review against actual peak demand, which most SMEs and small I&C buyers do not run as a routine. In practice, capacity-management is the single most under-managed cost line on a UK half-hourly meter.

Non-commodity costs in 2026

The unit rate on a commercial electricity contract in 2026 contains: wholesale energy (roughly 35-50% of the unit rate depending on contract structure and wholesale curve), network charges (Distribution Use of System, Transmission Use of System, Balancing Services Use of System; broadly 15-25%), policy costs (Renewables Obligation, Contracts for Difference levy, Capacity Market, Feed-in Tariff legacy; broadly 15-20%), and supplier operating cost and margin (5-15%). The DESNZ March 2026 statistical release breaks these components out at sector level. A fully-fixed contract absorbs all of these into a single rate; a pass-through contract holds wholesale fixed and reconciles the rest. The reason this matters for structure choice is that non-commodity costs in 2026 are more volatile than they were pre-2020, because policy charges have been adjusted in successive Capacity Market and Contracts for Difference auctions.

A buyer signing fully-fixed in May 2026 is paying a small premium for the supplier to absorb that volatility. Whether that premium is worth paying depends on appetite for reconciliation risk.

Change-of-tenancy administration

A change of tenancy must be communicated to the incumbent supplier with the date of change, the new occupier's details, and a meter reading at the change date. Without that communication, the outgoing business remains liable for the meter, and the incoming business arrives without a contract and on deemed supply. The Ofgem energy advice for businesses page covers the mechanics. For larger half-hourly sites, change-of-tenancy administration interacts with the DNO's connection records and the Meter Operator (MOP) and Data Collector (DC) contracts, which sit separately from the supply contract. Here is where it breaks for a small business taking on a half-hourly site: the supply contract is one of four moving parts (supply, MOP, DC, DUoS), and missing any of them on a tenancy change creates billing chaos for months.

Regional and devolved context

Great Britain operates under one Ofgem-regulated retail market, with regional Distribution Network Operator areas (UK Power Networks in London and the South East; Northern Powergrid in the North East and Yorkshire; Electricity North West; SP Energy Networks in southern Scotland and parts of north Wales; SSEN in north Scotland and central southern England; National Grid Electricity Distribution covering the East and West Midlands, South Wales and the South West). Network charges differ across these regions and feed through into commercial supply prices. Wales is GB-regulated and uses the same supplier set as England and Scotland; Northern Ireland sits outside under the Utility Regulator. A UK-wide commercial portfolio must reconcile the GB regional differences and treat Northern Ireland as a separate procurement.

A named example: a Leeds logistics firm in January 2026

A Leeds-based logistics firm with a half-hourly metered warehouse and annual electricity consumption of 480,000 kWh ran a procurement on 17 January 2026. The firm received three quotes: a fully-fixed 24-month at 28.4 p/kWh, a pass-through 24-month at 24.1 p/kWh wholesale plus non-commodity at cost, and a flex contract with a defined risk corridor. The firm modelled the pass-through against historical non-commodity volatility and chose pass-through, accepting the reconciliation risk in exchange for an expected 1.5-2.5 p/kWh saving over the term. The firm also requested an ASC review and discovered its agreed capacity was 250 kVA against actual peak demand of 295 kVA, accumulating excess capacity charges. The ASC renegotiation alone saved more than the contract structure decision over the first year.

What changes for SMEs in the proposed 2026 rules

Ofgem's Non-Domestic Market Review covers TPI conduct, microbusiness protections, and proposals for extending some microbusiness-style protections to a wider non-domestic segment. The exact scope is in statutory consultation in 2026, and the final licence condition modifications will land after consultation closes. An SME today should not wait for the rule; the existing Ofgem energy advice for businesses page, the Energy Ombudsman scheme for microbusinesses, and Citizens Advice business energy guidance cover the available protections in May 2026.

Editorial disclaimer. KaelTripton is an independent UK publisher. This article is editorial, not personal financial or energy procurement advice. Rates, caps, grant levels and supplier offers move; verify any figure with the named primary source before acting on it. KaelTripton does not earn commission from suppliers or brokers mentioned.

Frequently asked questions

What is the difference between a fixed and a pass-through commercial energy contract?

A fixed contract locks unit rate and standing charge for the term and absorbs non-commodity volatility into the headline rate. A pass-through contract fixes the wholesale energy component but passes network, policy and balancing charges through at actual cost.

What is the SME and I&C boundary in UK commercial energy?

The practical boundary is roughly 100,000 kWh annual electricity consumption or a half-hourly metered site. Above it, flex and pass-through structures open up; below it, fully-fixed dominates.

Are evergreen contract rollovers still legal?

For microbusinesses, Ofgem banned the worst evergreen behaviours and tightened renewal-window communication. For non-microbusiness SMEs and I&C sites, contractual rollover and out-of-contract rate clauses can still apply and must be read carefully.

What is a deemed rate on a UK commercial meter?

A deemed rate is the unilateral rate the incumbent supplier charges when a business occupies premises without a contract, typically 30-50% above the open-market equivalent. Signing a fixed contract on the tenancy date avoids the deemed bleed.

What is Available Supply Capacity (ASC)?

ASC is the maximum capacity in kVA agreed for a half-hourly metered site. Exceeding it accrues excess capacity charges; under-using it pays for unused capacity. Annual ASC review against actual peak demand is the under-managed cost line on most half-hourly meters.

Where can a UK commercial buyer find Ofgem guidance?

The Ofgem energy advice for businesses page covers the available protections and signposts to the Energy Ombudsman scheme. Citizens Advice also publishes business energy guidance.