How Forward Contracting Helps Businesses Manage Costs
Published October 2, 2026
Forward contracting is similar to securing your next materials order prior to an increase in price. Rather than having to wait until your current contract for electricity or gas is ending, forward contracting enables you to set up your next contract in advance.
You are thus able to look at all the offers available and lock in future prices, as well as arrange for the new contract to start when the current one ends.
How does forward contracting operate?
In forward contracting, you lock in your next electricity or gas contract before the end of your current contract. It depends on how far in advance you need to do this and how long you need the current contract to continue, but in general this would be done six to 18 months in advance.
The current contract operates normally while the new one is set to commence following the end of the current contract.
What reasons would prompt companies to consider forward contracting?
The prices of energy in the market can change from time to time due to changes in demand, weather, supply, etc.
It may be that the most competitive prices do not coincide with the expiration date of your existing contract.
With forward planning of your options, you could lock in a future contract under favourable market conditions as opposed to when you have limited time left in your existing contract.
Greater certainty over future energy cost
Budget certainty is among the top reasons why you should consider forward contracting. Getting your next energy contract sorted out in advance gives you an idea of what your business will be paying in terms of energy rates once the existing agreement expires.
Though it cannot predict future energy prices, forward contracting allows you to make decisions well ahead of time.
Reduce the risk of higher out of contract rates
In the absence of a new contract once the current one has lapsed, the company will then fall back into either out of contract or standing offer rates. Out of contract rates are normally above the market offer prices that could have been negotiated.
Early scheduling for your next agreement will be able to give you some buffer against falling under the out of contract situation.
Is there any impact on your current contract?
Forward contracting does not usually have an impact on your current contract. Your current agreement remains in effect until the expiration of the contract period and the new one starts thereafter. This implies that you can lock future prices without necessarily terminating your current contract.
When is the right time?
There is no single best time for every business. The right time to review your future energy options will depend on:
- Your current contract expiry date
- Market conditions
- Available retailer offers
- Your energy usage
- Your business location
- Your future operational plans
The secret is to ensure that you don’t start the process too late, when your contract is nearing its end. By starting the process earlier, you give your company enough time to make a judgment on pricing, analyse contracts and decide if it’s worth going for the next agreement. Choosing the right agreement is a matter of your business needs, not the best price you could find.
Make your decision more confident
There’s no need to wait until the expiration of your current energy agreement to consider other options. Through forward contracting, your business can get future pricing secured and minimize risks from market changes.
Utility Market will be able to review your current contract, verify your contract expiration date and analyse future offers available through our network of retailers.
