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Business energy procurement strategies: A practical guide to minimising costs

Effective energy procurement goes beyond occasionally switching suppliers to get the best deal. This guide explains the best business electricity and gas procurement strategies, and covers analysing market trends, contract timing, and managing energy price risk.

Whether you run a small company or oversee a large organisation, understanding how to plan your energy procurement can help you secure better prices and gain control over your energy spend.

Our guide covers:

• How the energy procurement process works
• How businesses manage energy procurement
• Types of energy procurement strategies
• Why energy procurement is important for businesses
• The future of business energy procurement

What is business energy procurement?

Business energy procurement is the process of sourcing, negotiating, and managing electricity and gas contracts to meet a company’s energy needs at the lowest possible cost. It involves analysing the wholesale energy market, choosing suitable contract terms, and managing supply agreements to balance cost, risk, and reliability.

Unlike simply switching business energy suppliers, business energy procurement takes a strategic, long-term approach. It considers factors such as contract length, price forecasts, energy consumption patterns, and timing to secure more stable and competitive rates.

For many organisations, effective business energy procurement means treating energy as a controllable business cost rather than a fixed expense. By taking a planned and informed approach, businesses can protect themselves from market volatility and create opportunities to reduce overall energy spend.

How the energy procurement process works

The following explains the step-by-step process an internal energy procurement team usually takes to secure competitive prices, manage risk, and maintain control over electricity and gas contracts.

Step 1: Energy usage analysis

The process starts with understanding how your business consumes energy. Analysing historic electricity and gas usage helps identify seasonal patterns, peak demand periods, and opportunities for efficiency.

We recommend reviewing at least 12 months of consumption data to build an accurate picture of your energy profile. This can be done using:

• Energy bills and statements from your supplier.
• Smart business energy meters that record real-time electricity and gas data.
• Half-hourly electricity meters for larger or more energy-intensive sites.
• Business energy monitoring software.

Understanding your current consumption profile allows your business to forecast future usage, a key step to choosing the right contract.

Step 2: Market intelligence

Next, build an understanding of current and projected market conditions. The wholesale energy markets fluctuate daily due to changes in supply, demand, weather, and geopolitical events.

Understanding current and forecasted wholesale prices will allow your business to select the best time to enter into a new energy contract.

It’s also important to review the additional costs built into your contract, which are made up of network charges and government levies. We recommend reviewing current and future forecasted costs for:

Network charges included within unit rates and standing charges

• Distribution Use of System (DUoS) – The cost of using your local electricity grid.
• Transmission Network Use of System (TNUoS) – Fees associated with using the national grid to deliver power to your property.
• Balancing Services Use of System (BSUoS) – Shared costs for the active balancing of supply and demand across the grid.

Taxes and environmental levies applied by the government:

• Climate Change Levy (CCL) – A tax on business energy use to promote improvements in business energy efficiency.
• VAT on business energy – A consumption tax of 20% added to most business energy bills.

Subscribe to regular updates from suppliers or market analysts to spot buying opportunities.

Accurate market insight helps you time purchasing decisions effectively and avoid locking into contracts at unfavourable rates.

Step 3: Procurement strategy selection

Once you understand your business energy consumption and market, choose the right procurement strategy for your organisation. Each option offers a different balance of cost certainty and flexibility:

• Fixed contract: Locks in rates for the duration of the term, offering budget stability.
• Flexible contract: Allows you to purchase energy in phases over time, securing rates when market conditions are best.
• Hybrid contract: Combines both approaches, fixing a core volume and leaving the remainder flexible.

When developing your procurement strategy, consider pricing risk, environmental targets, and scalability. The right strategy will reflect your business’s financial priorities and risk appetite.

Step 4: Tendering and supplier negotiation

Once your strategy is set, invite multiple suppliers to submit quotes for supplying your business with electricity and gas. Provide consistent data, including usage forecasts, contract lengths, and preferred start dates, to ensure directly comparable quotes.

Evaluate tenders based on total cost, considering both unit rates (price per kWh) and standing charges for electricity and gas, as well as any additional fees or non-commodity costs.

Negotiating across multiple suppliers helps secure competitive pricing and favourable contract terms that reflect your business’s actual energy use.

Step 5: Contract selection and signing

After reviewing quotes, select your preferred business energy supplier and finalise contract terms. Confirm all commercial details, including unit rates, non-commodity charges, termination clauses, and credit arrangements.

Electricity and gas will always require separate contracts, but aligning start and end dates can simplify management and renewal planning.

Once signed, ensure all sites and meters are correctly registered to avoid delays in the transfer process.

Step 6: Ongoing management and monitoring

Energy procurement doesn’t end once the contract is live. Regular monitoring helps you stay in control and prepare for future renewals.

• Validate invoices against agreed contract terms.
• Check consumption against forecasts.
• Track market changes and update your procurement strategy as conditions evolve.
• Arrange renewals ahead of time to avoid rolling onto out-of-contract rates.

Proactive management ensures your energy procurement strategy continues to deliver savings, stability, and support for your wider business objectives.

How businesses manage energy procurement

While the process above describes how to carry out an energy procurement strategy, most businesses don’t manage energy procurement on their own. Instead, they work with specialist energy partners who handle the process, negotiate contracts, and manage renewals.

Here’s how most businesses manage their energy procurement in practice.

Working with a business energy supplier

Many business energy suppliers have energy procurement teams that manage energy purchasing for their larger customers. These teams monitor the wholesale electricity market, track non-commodity costs, and help businesses secure competitive rates through fixed, flexible, or hybrid contracts.

Best for: Businesses that want a direct relationship with their supplier and prefer a single point of contact for energy management.

Advantages:

• Direct access to structured procurement options.
• Streamlined communication and billing.
• Access to the supplier’s own risk-managed purchasing frameworks.

Considerations:

• Limited to that supplier’s pricing and contract options.
• May not reflect the most competitive rate in the wider market.

Working with an energy broker

Business energy brokers act as intermediaries between businesses and business energy suppliers. They analyse your consumption, monitor the market, and negotiate contracts across a panel of suppliers to compare business energy prices.

Most brokers support fixed, flexible, or hybrid buying frameworks, and some manage group or basket procurement arrangements to combine separate smaller businesses for better pricing leverage.

Best for: Small to medium-sized businesses that want to compare business electricity tariffs from multiple suppliers with expert guidance.

Advantages:

• Access to competitive rates across a wide supplier panel.
• Expert support with timing, renewals, and contract structure.
• Reduced admin and independent market analysis.

Considerations:

• Transparency varies; always confirm how brokers are paid.
• Some may only work with a limited number of suppliers.

Working with an energy procurement company

Energy procurement companies manage the full process from start to finish. They typically handle everything from usage analysis and market monitoring to supplier tendering, contract negotiation, and post-contract management.

These companies often provide additional services such as bill validation, consumption reporting, and sustainability tracking, making them a good fit for larger or multi-site organisations.

Best for: Medium to large businesses looking for a fully managed energy procurement service.

Advantages:

• End-to-end management of the procurement process.
• Dedicated experts tracking market conditions and contract performance.
• Ongoing support with renewals, billing, and compliance.

Considerations:

• Managed services can carry a higher fee than broker-led procurement.
• Always confirm the level of independence and supplier access.

Which approach is right for your business?

Choosing how to manage your business energy procurement depends on the size of your organisation, the complexity of your energy use, and how much control you want over purchasing decisions. Each route offers different benefits in terms of market access, time commitment, and cost.

• Smaller businesses often benefit from broker-led procurement for access to multiple quotes and minimal admin.
• Medium-sized businesses may prefer supplier-led procurement for simplicity or procurement companies for wider oversight.
• Larger organisations typically use procurement companies or their own internal procurement team to manage complex portfolios.

Whichever route you choose, the aim is the same: to secure the most competitive contract at the right time, with a clear understanding of pricing, risk, and performance.

Types of energy procurement strategies

There are different types of energy procurement strategies to suit varying business needs, budgets, and risk profiles. The right strategy determines how and when you purchase electricity and gas, and the level of control you have over costs.

Below are the main types of business energy procurement strategies and how they work:

Fixed price energy procurement

A fixed price strategy provides complete cost certainty. Your business agrees on a set unit rate for electricity and gas, typically over a one to five-year contract.

This straightforward approach makes budgeting easier, as you know exactly what you’ll pay per kWh throughout the term.

Best for: Businesses that prioritise stability and want to avoid market volatility.

Advantages:

• Full price certainty across the contract.
• Simple to manage and easy to forecast.
• Protects budgets from sudden market changes.

Considerations:

• You won’t benefit from any market price reductions.
• Early termination may require fees or penalties.

Flexible or risk-managed energy procurement

Flexible procurement allows you to spread your purchasing across multiple points in the market rather than locking in a single price. You buy energy in blocks at different times, taking advantage of price dips and avoiding peaks.

This strategy requires regular monitoring of the wholesale energy market and a disciplined buying framework to decide when to fix portions of your energy volume.

Best for: Medium and large business energy users and a proactive approach to energy management.

Advantages:

• Opportunity to capture market lows.
• Greater control over timing and budget exposure.
• Spreads risk rather than concentrating it at one purchase point.

Considerations:

• Requires ongoing oversight and market insight.
• Poor timing or weak governance can increase costs.

Hybrid or portfolio energy procurement

A hybrid or portfolio approach combines the stability of fixed pricing with the flexibility of market-based purchasing. A portion of your expected usage is fixed in advance to protect against volatility, while the remaining volume is purchased at intervals throughout the contract.

This method suits organisations that want cost protection but still wish to participate in market opportunities.

Best for: Larger or multi-site business energy customers with diverse energy needs.

Advantages:

• Balances risk and opportunity.
• Provides partial price stability while allowing flexibility.
• Can be adapted over time as usage or market conditions change.

Considerations:

• Requires transparent governance to manage the flexible portion.
• More complex to administer than a fixed contract.

Green energy procurement

A green energy procurement strategy focuses on sourcing renewable or low-carbon energy to support sustainability and net-zero goals. Businesses can select green business energy tariffs, enter direct supply arrangements such as Corporate Power Purchase Agreements, or generate power on-site with commercial solar panels.

In the UK, most renewable energy is certified through the Renewable Energy Guarantees of Origin (REGO) scheme, which confirms that the electricity supplied to your business has been generated from renewable sources.

Best for: Organisations with environmental commitments or who publish Streamlined Energy and Carbon Reporting (SECR).

Advantages:

• Supports sustainability and CSR targets.
• Improves brand reputation and compliance.
• Can future-proof against rising carbon-related costs.

Considerations:

• Typically has a small price premium.
• Certification and origin of supply should always be verified.

Why energy procurement is important for businesses

Developing a clear energy procurement strategy helps companies to manage one of their largest and most unpredictable costs. Rather than reacting to changing market prices, strategic procurement gives you the tools to plan, control, and optimise how your business buys and uses energy.

Below are the three core reasons why energy procurement is so valuable to modern organisations.

Minimise business energy costs

A well-structured energy procurement strategy enables businesses to reduce overall electricity and gas spend. By analysing market conditions and timing contract renewals strategically, you can secure energy at more competitive rates.

This applies to all cost components typically found in a business energy contract:

Business electricity costs:

• Business electricity prices per kWh: the cost of each unit of electricity consumed.
• Business electricity standing charges: the fixed daily fee that covers the cost of maintaining your electricity connection and supply

Business gas costs:

• Business gas prices per kWh: the cost of each unit of gas consumed.
• Business gas standing charges: the daily charge applied to keep your gas connection active.

By negotiating these elements effectively, businesses can make substantial long-term savings.

Procurement experts often benchmark prices across commercial electricity and business gas suppliers to ensure contracts reflect current market value.

Mitigate energy price risk

Energy markets are volatile. Factors such as global fuel supply, weather conditions, and geopolitical events can cause sharp price movements. Businesses without a structured procurement plan are exposed to these fluctuations.

A strong procurement strategy locks in energy costs for future years through fixed-term contracts or flexible purchasing frameworks. This approach reduces exposure to sudden price spikes and allows for accurate budgeting.

The 2022 energy crisis, where wholesale prices rose by over 400%, highlighted the importance of forward planning. Businesses that had secured their rates in advance were shielded from these extreme increases.

Support corporate and environmental goals

Energy procurement can also help businesses achieve their environmental and corporate responsibility objectives. By choosing green business energy tariffs or offsetting natural gas consumption, organisations can reduce their carbon footprint while meeting sustainability and CSR targets.

Proactive procurement decisions, such as sourcing from low-carbon generators or purchasing Renewable Energy Guarantees of Origin (REGO) certified electricity, demonstrate environmental commitment and can enhance brand reputation.

Energy procurement contracts

Your business energy procurement contract sets out the terms agreed between your business and a licensed supplier. Understanding these details helps avoid unexpected costs and ensures your business remains in control throughout the contract term.

Here’s what to check before signing or renewing a business energy contract:

• Contract length: Most business energy contracts run for one to five years. Ensure the term matches your business plans and that you understand when renewal notices are required.
• Exit terms: Check the process for ending your contract early, including notice periods, exit fees, or volume penalties for flexible contracts.
• Auto-renewal clauses: Some suppliers automatically roll contracts onto higher rates if notice isn’t given. Keeping track of renewal dates is essential to avoid being locked into a new term at unfavourable rates.
• Hidden charges: Review the fine print for administration fees, metering charges, or broker commissions not shown in the headline rate.
• Termination costs: Ending a contract early can trigger significant exit fees, which are often calculated based on the remaining term and projected energy use. These payments can be substantial, making early termination an expensive option for most businesses.
• Contract details: Your energy procurement contract should include your company name, supply addresses, and individual meter point references (MPANs and MPRNs).
• Contract prices: It should confirm the agreed unit rates, standing charges, and any allowances for changes in energy usage.
• Flexible contract terms: If you’re on a flexible contract, the document should outline how and when energy will be purchased, including the structure for buying in blocks throughout the contract term.

💡Always keep a signed copy and written supplier confirmation to protect your business against business electricity bill or business gas bill disputes.

The future of business energy procurement

The way businesses buy energy is changing rapidly. New technology, sustainability targets, and market reforms are reshaping how procurement strategies are designed and managed.

Digital platforms and automation

Advances in digital procurement tools and energy management software are transforming how businesses monitor usage and track market prices.

Automated purchasing platforms allow real-time tendering, contract visibility, and data-driven decision-making, giving businesses greater control and transparency.

Demand Side Response (DSR)

Demand Side Response (DSR) allows businesses to adjust or reduce electricity consumption at certain times to help balance supply on the National Grid. By reducing demand during peak periods or shifting usage to off-peak hours, businesses can lower their costs and support grid stability as renewable generation increases.

Integrating DSR into an energy procurement strategy enables businesses to be more flexible with how and when they use power, helping to cut bills while demonstrating a proactive role in the UK’s transition to a decarbonised energy grid.

Demand Flexibility Service (DFS)

The Demand Flexibility Service (DFS) is NESO’s new initiative that rewards businesses for reducing electricity consumption during periods of peak grid stress.

Businesses that participate can earn payments or credits by voluntarily cutting or shifting electricity use when requested. Incorporating DFS participation in an energy procurement plan can enhance cost efficiency.

Market-wide Half-Hourly Settlement (MHHS)

Another major development shaping the future of energy procurement is the introduction of Market-wide Half-Hourly Settlement.

This reform will require all business electricity consumption to be settled every half hour using smart meter data, which will introduce innovative new multi-rate business energy tariffs providing more choices for energy procurement.

Battery storage

Solar battery storage systems will become an essential part of future energy procurement strategies as businesses look for greater cost control and flexibility.

Battery storage allows organisations to minimise exposure to peak prices by charging when electricity rates are low and discharging during high-cost periods. This avoids paying peak prices for grid electricity during the working day.

Batteries can also reduce maximum demand by supplying stored energy during short spikes in consumption. This keeps grid demand within agreed capacity limits and helps eliminate costly excess demand charges.

As pricing and grid capacity pressures grow, battery systems will play an increasingly important role in how businesses plan and manage future energy procurement.

Net zero and policy impacts

The UK’s transition to net zero will continue to shape how businesses procure energy in the years ahead. Government policy supports large-scale renewable generation through the Contracts for Difference (CfD) scheme, which guarantees a fixed price for low-carbon electricity producers.

While this mechanism helps increase renewable capacity and improve long-term energy security, it is funded through environmental levies added to business energy bills. As more renewable projects are brought online, these charges are expected to rise, increasing costs for end users.

Procurement teams will need to plan for these policy-driven costs when forecasting their business energy costs.

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