Fixed vs Pass-Through Business Energy Contracts: Which Is Right for Your Business?

In April 2026, many companies on ‘fixed’ business energy contracts were told their prices were increasing mid-contract.

Their suppliers were allowed under the contract, but most of those businesses didn’t know why until they read the small print.

The reason comes down to the difference between fixed and pass-through contracts. And understanding it is now one of the most valuable things a finance director or energy manager can do before their next renewal.

What is a fixed contract?

A fixed business energy contract locks in your unit rate, the price you pay per kWh of electricity, for your contract term.

The appeal is straightforward: you know what you are paying, you can budget accurately, and you are protected if wholesale energy prices rise during your term.

However, the word ‘fixed’ in most business energy contracts refers specifically to the commodity element of your bill, the wholesale cost of the electricity itself, plus your supplier’s margin. Typically, this makes up around 40% of your total bill.

Whether the remaining non-commodity charges are also fixed, which include network costs and government levies, depends on your contract terms.

Not having a clear understanding of your business energy contract set-up is what causes confusion when bills move unexpectedly mid-term.

What is a pass-through contract?

Instead of having one fixed rate, a pass-through business energy contract, sometimes called a third-party charge pass-through or non-commodity pass-through contract, separates non-commodity costs from the wholesale energy price.

Your commodity rate stays fixed, but network and policy charges move in line with the rates set by NESO, your DNO, and the government.

This means you can see exactly what you’re paying for, but you also take on the risk of changes to those regulated rates during your contract term.

If network charges fall, you pay less. If they rise, as they did significantly in April 2026, your bill reflects that increase directly.

For a full explanation of what each non-commodity charge is and who sets it, read our guide: Business Energy Bills in 2026 Explained: Every Charge and What It Means.

What does ‘fixed’ actually fix, and what doesn’t it?

The question most companies should ask before signing any business energy contract, yet rarely do.

In a fixed contract, the supplier has built an estimate of all non-commodity charges into the unit rate and standing charge you agree at the start.

If network charges rise, the supplier absorbs the difference*, and you continue to pay what you agreed.

The trade-off is cost. Suppliers usually build a buffer into rates to protect themselves against future increases, meaning fixed contracts are typically priced higher than pass-through alternatives at the point of signing.

In a fixed contract with pass-through terms, the commodity rate is fixed, but the contract allows the supplier to pass through changes to regulated non- commodity charges.

Charges like the Transmission Network Use of System (TNUoS) and the Distribution Use of System (DUoS) can all move mid-contract if the relevant regulatory rates change.

Why some ‘fixed’ contracts went up in April 2026

From April 2026, TNUoS charges increased by an average of around 62% across Great Britain, following the start of the RIIO-ET3 regulatory period.

The increase was largely driven by investment in the UK transmission network and renewable infrastructure.

For businesses on a fixed contract, the increase likely had no immediate effect on their bills and their supplier absorbed it. For businesses on contracts with pass-through clauses for network charges, the increase was applied directly and mid-contract.

Both contract structures are common across the market. The difference came down to the contract terms businesses had signed.

It is also worth noting that some business energy contracts contain clauses allowing suppliers to reopen pricing in response to significant regulatory changes, meaning even all-in customers should check their specific terms rather than assuming complete protection.

For a detailed breakdown of the TNUoS increase and what drove it, read: TNUoS
Charges 2026: Why Your Business Electricity Bill Increased in April.

The April 2026 increases served as a sharp reminder that these charges can move significantly over a contract term.

How to check which type of business energy contract you’re on

If you are unsure whether your current business energy contract is fixed or pass-through, there are a few straightforward ways to find out.

In your contract, look for a section covering third-party charges, non-commodity costs, or pass-through terms. If you see language allowing the supplier to apply changes to regulated charges (TNUoS, DUoS, BSUoS, or policy levies), mid-contract, you are on a pass-through contract for those elements.

If the contract language is unclear, our team can help you identify exactly which charges are fixed, which are pass-through, and where your business may be exposed to future increases.

Which contract type is right for your business?

The right structure depends on how much cost risk your business is comfortable carrying, your ability to forecast and absorb mid-term changes, and the current trajectory of non-commodity charges.

In periods where non-commodity charges are expected to rise, as they have been in recent years, the fixed premium may represent good value. In stable or falling non-commodity environments, pass-through contracts can deliver a lower overall cost.

The challenge is that non-commodity trajectories are not always predictable, and the risk sits with your business in a pass-through structure.

For most small and mid-sized businesses without a dedicated energy management resource, fixed contracts offer a potentially more manageable arrangement.

For larger organisations capable of tracking and responding to non-commodity movements, pass-through contracts can offer transparency and cost advantages, provided the risk is properly understood and budgeted for.

The questions to ask at your next renewal

These are the questions that matter most:

• Is the TNUoS element fixed or pass-through under this business energy contract?
• What TNUoS tariff assumption has been built into this quote? Is that the current published rate?
• What happens to my bill if NESO revises TNUoS tariffs mid-term? Am I protected or exposed?
• Is BSUoS fixed or pass-through under this business energy contract?
• Are policy levies (CCL, Capacity Market, CfD, Nuclear RAB) included in the fixed rate or passed through separately?
• Which elements of the contract are fixed, and which can still change during the term?

These are exactly the areas Tritility reviews with businesses before they sign a contract. We help break down what is fixed, where pass-through exposure exists, and how future network or policy changes could affect costs during the agreement.

For many businesses, the risk isn’t the contract; it’s not fully understanding what sits behind the quoted rate before committing to it.

Take control of your energy costs with a free Tritility contract review. Find out exactly what your current business energy contract does or doesn’t protect you from, where hidden pass-through exposure exists, and what it could mean for your costs now and through to renewal.

*All energy suppliers reserve the right to increase costs or amend contract terms in exceptional circumstances outside of their control, often referred to as force majeure events.