Wholesale vs. Fixed Business Energy Prices: What to Choose in 2026

Why wholesale prices aren't the whole story

Wholesale energy costs make up around 40% of a bill, and they're driven by weather, demand and global events, according to Ofgem. The market's been particularly unsettled through 2026, with the conflict in Iran adding to that volatility. That's exactly why fixating on today's wholesale figure isn't much help. What matters more is how you structure your contract to handle that volatility, whichever way it moves next, and understanding how the wholesale energy market works helps put today's prices in context.

There's no single right answer. It all comes down to how long you fix for and how much risk your business can carry, not the wholesale price on the day you happen to compare.

Contract length does more work than people think

A fixed rate tariff locks in your unit rate and standing charge for an agreed period, typically one to five years. The length you choose has a bigger effect on your risk exposure than the wholesale price on the day you sign.

• Shorter fixes (12 months) keep you close to the market. You'll re-price sooner, which suits you if you think rates might fall, but it also means facing that decision again sooner.

• Mid-length fixes (2 to 3 years) are a reasonable middle ground for many SMEs, balancing budget certainty against being locked into one rate for too long. Our guide to 2 and 3 year fixed tariffs goes into more detail if you're weighing these up.

• Longer fixes (4 to 5 years) suit businesses that want to stop thinking about energy costs altogether. You give up the chance to benefit from a market dip, in exchange for years of budgeting certainty.

What longer fixes don't tell you upfront

A longer fix isn't free of risk; it just trades one kind of risk for another. Before signing anything beyond two years, it's worth thinking through:

• Exit fees. Leaving a fixed contract early usually comes with a charge. The cost varies by supplier and how much of the term's left to run, so it's worth checking your own contract terms rather than assuming it's negligible.

• Outgrowing the contract. If your business scales up significantly, a rate agreed for a much smaller usage profile may no longer reflect a competitive deal, and you're tied in either way.

• Moving premises. Contracts are attached to a meter, not a business, so your existing tariff doesn't automatically move with you. If you're relocating or closing a site, it's worth understanding what happens to your energy during a change of tenancy before you commit to a long fix.

None of this means longer fixes are a bad idea. It just means the certainty they offer comes with a trade-off worth understanding before you sign, not after.

How exposed is your business, really?

"How much certainty do you need?" is easy to ask and harder to answer at 11 pm with a renewal notice in front of you. A couple of concrete markers help:

What percentage of your overheads is energy?

If it's a small slice, a shorter fix and a bit of market exposure probably won't hurt. If it's a significant cost line, closer to double digits, the stability of a longer fix carries more weight.

Is your business growing, shrinking, or staying put?

A business expecting to add sites, headcount or equipment in the next two years is more likely to outgrow a long fix. A stable, settled operation has less to lose by locking one in.

What happens if you do nothing

This is the bit that catches businesses out. If your contract ends and you haven't arranged a new one, most suppliers move you onto an out-of-contract or deemed rate automatically, and these can be up to 80% more expensive than the cheapest available tariffs. They apply from the day after your contract ends, whether you've noticed or not. The same applies if you move premises without a new contract lined up, so it's worth planning ahead either way.

The fix is simple: know your contract end date and start comparing three to six months before it. Whatever length you choose next, doing nothing is reliably the most expensive option on the table.