Business energy contracts have got more complicated, and the way some of them get sold hasn’t kept pace with that complexity. That matters when two quotes that appear directly comparable can actually include very different costs, risks, and levels of flexibility.
Quick Answer
A low headline rate on a pass-through or multi-purchase energy contract often only covers part of your bill. Costs like network charges, balancing costs, and government levies can fall outside that number and be billed later based on what actually happens. That can still be a good deal for the right business, but a fair comparison against a fixed price needs the expected total cost, not the unit rate on the front page alone. The government is also moving to bring energy brokers under direct Ofgem regulation, partly because of mis-selling concerns in exactly this part of the market.
A pass-through contract, a multi-purchase agreement, and a fully fixed contract can all be the right choice for the right business. The problem isn’t the products themselves; it’s when a broker takes one part of a complicated structure and compares it directly against the full price of a simpler one.
This matters more than usual right now. The government has confirmed plans to bring energy brokers under direct regulation by Ofgem, and mis-selling is one of the specific problems the new rules are designed to address. We’ll cover what that means for the market later in this article, but the short version is that the way contracts are compared and explained to customers is about to come under much more scrutiny.
Key Takeaways
- A low headline unit rate on a pass-through or multi-purchase contract often only covers part of the bill; the rest can be added on top or reconciled later.
- Pass-through and multi-purchase contracts aren’t bad products, but the trade-offs need to be explained clearly before you sign.
- A fair comparison uses the expected total delivered cost across the whole contract rather than the headline unit rate alone.
- Ofgem is preparing to regulate energy brokers directly, with mis-selling named as one of the specific problems the new rules target.
- Ask what’s included in any rate you’re quoted, what isn’t, and how your broker gets paid.
What Is a Pass-Through Energy Contract?
A pass-through energy contract fixes the commodity, or wholesale, element of your price for the length of the agreement. Certain non-commodity costs, such as network or balancing charges, aren’t fixed. Instead, they’re billed at cost as they arise, based on what actually happens rather than a supplier’s advance estimate. It’s one of several structures available as part of business energy procurement, alongside fully fixed and multi-purchase contracts.
What Is a Multi-Purchase Energy Contract?
A multi-purchase energy contract spreads a business’s wholesale energy purchasing across several time periods, instead of fixing the entire requirement on a single day. That can reduce the risk of locking in a bad price during a volatile market, and volatility is a real, current risk, as we covered in our look at the Iran crisis and its effect on energy procurement. The trade-off is that the specific terms, including purchasing deadlines and what happens if a window is missed, vary significantly between products.
A Unit Rate Isn’t the Whole Story
Here’s the comparison that catches people out most often. A customer is quoted something like 29p/kWh on a fully fixed contract, versus 8p/kWh on a pass-through or multi-purchase product. Eight pence looks a lot better than twenty-nine, and you don’t need to be an energy expert to see why that’s tempting.
The problem is that the 8p figure may represent only one part of the bill, usually the commodity (wholesale energy) element. The remaining costs can include:
- Distribution and transmission network charges (often shown as DUoS and TNUoS on a bill)
- Balancing costs, which cover keeping the supply and demand matched on the grid
- Renewables Obligation and Contracts for Difference costs, which fund renewable generation
- Capacity Market charges, which pay generators to guarantee that supply is available
- Legacy Feed-in Tariff and Nuclear RAB costs
- Metering, data collection, and standing charges
- Other network, industry, or regulatory costs that vary by supplier and contract.
Some of these costs are fixed for the length of the contract. Others are passed through at cost as they arise, and some are only reconciled once actual usage and market conditions are known. Comparing an 8p component of one contract against a 29p all-in rate from another isn’t a meaningful comparison, because the two numbers aren’t measuring the same thing.
Some sectors can also reduce specific non-commodity levies directly, for example, through a Climate Change Agreement, or the EII Exemption Scheme, with eligible EII businesses also able to access Network Charging Compensation.
|
Quote |
What’s included | Indicative comparison |
| Fully fixed | Commodity + agreed non-commodity costs | 29p/kWh |
| Pass-through headline | Commodity only | 8p/kWh |
| Pass-through delivered estimate | Commodity + expected additional costs | e.g. 18–22p/kWh |
Illustrative example only. Actual contract structures and costs vary.
When a Pass-Through Contract Makes Sense
Pass-through contracts aren’t a bad choice. For the right business, they can work out well. A supplier fixing non-commodity charges years in advance has to forecast what those charges will eventually cost, and that forecasting risk tends to be priced into the rate. A pass-through customer takes on more of that risk directly, instead, paying certain charges based on what actually happens rather than a supplier’s advance estimate. That can work in the customer’s favour, and it can also work the other way.
The important part is ensuring that the trade-off is explained properly. If a broker quotes a commodity rate of 8p/kWh, but non-commodity costs, standing charges, and network levies add another 10p-14p/kWh to your delivered cost, your true unit rate is closer to 20p/kWh. The customer needs to see the delivered estimate before signing. Our guide to what to ask your energy broker covers the specific questions to raise at that stage.
Multi-Purchase Contracts and What They Actually Allow
Multi-purchase is another product that is regularly conflated with full flexibility. Instead of buying an entire year’s wholesale energy requirement on a single day, a multi-purchase contract spreads that buying across several time points, reducing the risk of locking in a bad price on any day. That’s a genuinely useful feature for a business with a large or volatile energy requirement, and volatility is very much a live risk this year: our recent look at the potential for another UK energy crisis this winter covers exactly the kind of market swing that makes purchase timing matter.
What it doesn’t automatically mean is that the contract behaves like a fully flexible trading position. Depending on the product, once a tranche of energy has been purchased, it may effectively be fixed, with no ability to sell it back if the market later falls. There may be set purchasing windows, decision-making deadlines, and limits on the number of price requests or trades that can be made. If a purchase isn’t made before the relevant deadline, many contracts include a default mechanism that sets the price automatically rather than waiting for a decision.
That’s a different proposition from language sometimes used to sell these products, along the lines of promising the market will be actively traded on the customer’s behalf, or that a position will simply be moved if prices fall. Sometimes that’s genuinely possible under the contract terms. Sometimes it isn’t. The only way to know is to read what the specific product actually allows.
A Purchasing Strategy Needs More Than Good Intentions
There’s a common assumption that the more complicated a procurement approach sounds, the more sophisticated it must be. Splitting a purchase into several tranches can spread risk, but only if there’s a real plan behind when and why each purchase happens. A genuine purchasing strategy should be able to answer questions like these before it’s put into action:
- What are the budget targets and maximum acceptable exposure?
- What market levels would trigger a purchase?
- What are the agreed purchasing windows and decision deadlines?
- Who is responsible for making the purchasing decision, and how is it reported back?
Without answers to those questions, splitting a purchase into four tranches spreads the purchasing dates without necessarily creating a coherent strategy. The product doesn’t create the strategy. The person managing the account does.
Compare Total Delivered Cost, Not Just the Headline Rate
Rather than comparing headline pence-per-kWh figures, a fairer comparison adds up what a business can reasonably expect to spend across the whole contract: the commodity cost, any fixed non-commodity costs, estimated pass-through costs based on current market expectations, standing and capacity charges, metering and data costs, and any broker or consultancy fees. Add those together, and you get an expected delivered cost.
That figure won’t be exact for a pass-through contract, since some elements are designed to move with the market. But an honest, estimated delivered cost is a far more useful comparison than putting an incomplete unit rate next to a complete one and assuming the smaller number wins. It’s also worth checking this figure against what you’re actually being billed once the contract is live. A business energy audit is the most reliable way to confirm your invoices match what was agreed.
Two Questions Worth Asking Before You Sign
If you’re comparing two offers and one looks dramatically cheaper than the other, it’s worth asking two direct questions before getting excited about the number: what’s included in this figure, and what isn’t. Those two questions, on their own, can completely change how a comparison looks. For a fuller list of questions to raise with any broker, our guide on what utility brokers do and why your business might need one is a good starting point.
Ask How Your Broker Gets Paid
There’s one more figure that should never disappear from the conversation: the broker’s own fee. Some consultancy charges are invoiced separately. Others are built into the energy price itself. Neither approach is automatically wrong, but a business should know how much its broker is being paid, how that payment is collected, whether it’s already included in the rate being quoted, and what ongoing service is provided in return. That’s a reasonable thing to ask, and a reasonable broker should have a straightforward answer.
New Rules Are Coming for Energy Brokers
This isn’t a hypothetical concern. In a consultation that closed in November 2024, the Department for Energy Security and Net Zero (DESNZ) set out proposals to directly regulate third-party intermediaries, the official term for energy brokers, price comparison sites, and similar businesses. Its government response, published in October 2025, confirmed the direction of travel: non-transparent practices and mis-selling, particularly affecting small and micro-businesses, were named as the specific problems the new rules are meant to fix.
The plan is for Ofgem to be appointed as the dedicated regulator once parliamentary time allows, with powers to set rules for broker conduct, investigate market practices, order redress where harm has occurred, and fine or exclude firms that don’t comply. Every broker arranging energy contracts would need to register with Ofgem and meet a “fit and proper person” test before they can keep operating. Ofgem’s own market review of the TPI sector closed for responses in July 2026, which is the evidence-gathering stage ahead of the detailed rules being drawn up.
On the timeline, only one part of it is fixed by the government so far: legislation is still waiting on parliamentary time, and once it’s in place, existing brokers get a 12 to 18-month sunrise period to register before the regime becomes mandatory. That could put registration around 2027 and full enforcement around 2028, although neither date has been formally confirmed. That’s the industry’s best current estimate, not a date Ofgem or the government has fixed, so it’s worth treating it as a direction of travel rather than a hard deadline when you’re planning around it.
What Good Energy Procurement Advice Looks Like
A proper recommendation shouldn’t stop at naming the cheapest-looking supplier. It should set out which products are available, what each one fixes, what each one leaves exposed to the market, the expected delivered cost, the risks, and a recommendation based on the business’s own circumstances and appetite for risk. Sometimes that answer is a fully fixed contract. Sometimes it’s pass-through, multi-purchase, or a fully flexible position. The right answer depends on the business, not on which product is easiest to sell.
That’s the same principle behind our own energy procurement service, and it doesn’t stop once a contract is signed either. Ongoing account management (checking statements, tracking renewal windows, and flagging changes in market conditions) is what turns a one-off procurement decision into something that keeps working for your business. If you’re due a renewal, our 2026 business energy rates guide is a useful starting point for what current market rates actually look like. It’s the same approach that helped Martin House Hospice get a contract that actually matched their situation, rather than just the cheapest-looking one on paper.
Pass-Through and Multi-Purchase Energy Contracts: Frequently Asked Questions
A few of the questions we’re asked most often when a business is weighing up a pass-through, multi-purchase or fully flexible energy contract against a standard fixed deal.
Can non-commodity costs increase during a pass-through contract?
Yes. Depending on the contract, some network, balancing, and policy costs are passed through at the rates that apply when they’re incurred. That means your final delivered cost can rise or fall even if the commodity element of your contract is fixed.
Is a pass-through contract cheaper than a fixed contract?
It depends on what actually happens to the costs that aren’t fixed. The headline rate is often lower because it doesn’t include everything, but the true cost depends on how those variable elements move over the contract term. It can end up cheaper or more expensive than a fully fixed deal.
Can I change a multi-purchase position after I’ve bought energy?
It depends entirely on the product. Some contracts allow greater trading flexibility, while others effectively fix a tranche once it has been purchased. Before signing, check whether purchases can be sold back or repositioned, what deadlines apply and what happens if no purchasing decision is made within the agreed window.
When will Ofgem start regulating energy brokers?
Legislation is still waiting on parliamentary time, so there’s no confirmed statutory date yet. Based on the government’s own response and the 12 to 18-month sunrise period, it’s proposed that once legislation is in place, industry commentary is broadly expecting broker registration to open around 2027, with full mandatory enforcement from around 2028.
How do I know if my broker is explaining a contract properly?
A good broker should be able to tell you exactly what’s fixed in your quoted rate, what isn’t, roughly what those variable costs are currently expected to cost, and how they themselves are paid. If any of those questions get a vague answer, it’s worth asking again before you sign; our guide on what to ask your energy broker has a fuller list.
Not Sure What’s in Your Current Contract?
If you’ve already got a pass-through, multi-purchase, or flexible energy contract and you’re not entirely sure what’s fixed and what isn’t, that’s a conversation worth having now rather than waiting for your next renewal. Get in touch with our team, and we’ll go through what you’re actually paying for, in plain terms.
"*" indicates required fields
Article Sources
- GOV.UK. Regulating Third-Party Intermediaries (TPIs) in the retail energy market: consultation and government response. October 23rd, 2025
- Ofgem. Third-party intermediaries (TPIs) market review: call for input. July 17th, 2026
- Crown Gas & Power. Regulating Third-Party Intermediaries (TPIs) in the Retail Energy Market: Government response. October 23rd, 2025.
