When signing or renewing an electricity or natural gas contract, businesses face a structural choice: opt for a fixed price or an indexed price. Each formula has different advantages and risks. This guide helps you see clearly.
The two main contract families
Fixed price
The price per kWh is locked for the entire contract duration (typically 1 to 3 years).
- Advantage: complete budget predictability
- Risk: if markets drop, you don't benefit from the decrease
Indexed price
The price per kWh fluctuates according to a market index (e.g., EEX, EPEX Spot, PEG for gas).
- Advantage: potential savings if markets are favourable
- Risk: volatility, unpredictable budget
Fixed-price contracts in detail
With a fixed-price contract, the supplier commits to a constant price per kWh for the entire contract duration. This price typically includes the energy supply and, in some offers, part of the network charges.
When to choose fixed pricing?
- Need for budget predictability: the energy budget is known in advance, making financial forecasting easier.
- Markets at historically low levels: locking in a low price protects against future increases.
- Low risk appetite: the business prefers security over opportunity.
- Committed selling prices: if your business involves fixed quotes or tariffs for your clients, a fixed energy cost protects your margins.
Important: "fixed price" does not mean the total bill is fixed. Taxes (excise duty, CTA) and TURPE can change independently of the supply price. Some contracts include a clause for revising these regulated components.
Indexed-price contracts in detail
Indexed pricing follows the fluctuations of a wholesale market reference index. For electricity in France, the most common indices are:
- EEX (European Energy Exchange): the futures market, with quotations for future periods (month, quarter, year).
- EPEX Spot: the spot market (day-ahead or hourly prices). More volatile, but reflects the real market price at a given moment.
For natural gas, references include the PEG (Point d'Echange de Gaz) and the TTF (Title Transfer Facility, the European benchmark).
When to choose indexed pricing?
- Markets at elevated levels: during high-price periods, an indexed contract allows you to benefit from a potential decline.
- Ability to absorb volatility: the business has sufficient cash flow to manage monthly fluctuations.
- Active market monitoring: the business (or its advisor) regularly tracks prices and can consider locking in prices later ("clicking" to a fixed price).
Comparison table
| Criterion | Fixed price | Indexed price |
|---|---|---|
| Predictability | High — budget known in advance | Low — depends on market |
| Savings potential | Limited — no gain if market drops | High — benefits from decreases |
| Risk | Low — unless market drops sharply | High — exposed to increases |
| Complexity | Simple — one price | Moderate — requires understanding indices |
| Typical duration | 1 to 3 years | 1 year (often renewable) |
| Best suited for | SMEs, constrained budgets, low risk appetite | Mid-caps/large accounts, active monitoring, risk tolerance |
Hybrid formulas
Between fully fixed and fully indexed, intermediate formulas exist:
- Fixed price with "tunnel" clause: the price is fixed but can be revised up or down within a predetermined range.
- Indexed price with cap: the price follows the market but cannot exceed a defined ceiling. This protection comes at a cost (premium).
- Progressive fixing (clicks): the contract is indexed, but the business can "fix" volume tranches at a given price over time, to smooth out risk.
Advice: progressive fixing is often considered the most balanced strategy for businesses with significant volumes. It combines market flexibility with gradual budget security.
4 questions to ask before choosing
- What is my risk tolerance? During our advisory work at Unisave, this is the first question we ask our clients. If a 20% increase in the energy bill would strain your cash flow or margins, fixed pricing is more prudent.
- Do I have the resources to monitor markets? An indexed contract requires regular market watching. Without monitoring, you are subject to fluctuations without being able to react. It is all the more important to read your bill carefully to check the prices applied.
- What is the current market context? Locking in a price when markets are low is strategically sound. Conversely, committing to a fixed price at the top of the cycle can be costly.
- What is the optimal duration? The longer the contract, the higher the risk premium built into the fixed price by the supplier. A 12-month contract generally offers better conditions than a 36-month commitment.
Conclusion
There is no universal answer: the best contract depends on your consumption profile, risk tolerance, and market conditions. The key is to make an informed choice rather than passively accepting a tacit renewal, one of the most common billing mistakes.
At Unisave, we analyse your current contracts, compare available offers, and help you choose the formula best suited to your situation.
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