The choice between a 12-month and 24-month commercial energy contract is a trade-off between flexibility and certainty — and between market timing risk and administrative simplicity. The right term depends on your operational outlook, current market conditions, and how much time you want to spend on procurement.
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Side-by-Side Comparison
| Factor | Option A | Option B |
|---|---|---|
| Price lock duration | 12 months | 24 months |
| Repricing frequency | Every year | Every two years |
| Flexibility to reprice | High — annual opportunity | Lower — locked for 2 years |
| Protection from rising prices | One year only | Two years |
| Exposure to falling prices | Reprice opportunity in 12 months | Locked out for 2 years |
| Administrative burden | Higher — procure annually | Lower — procure every 2 years |
| ETF risk if needs change | Lower — shorter term | Higher — 24 months remaining |
| Typical rate premium | Slight discount (shorter term) | Slight premium (longer lock) |
When 12-Month Contracts Make Sense
12-month contracts work best when: you expect your facility's usage to change significantly, you believe wholesale prices are at or near a cyclical high and may fall, you want the flexibility to test different suppliers annually, or you're in a situation where 24-month price certainty isn't materially more valuable than 12-month.
When 24-Month Contracts Make Sense
24-month contracts make sense when: wholesale prices are at or below historical averages (locking in favorable rates for longer), you want to reduce procurement frequency and administrative burden, your usage profile is stable and predictable, and the cost difference between 12 and 24 month pricing is minimal.
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The Market Timing Dimension
Contract length is inseparable from market timing. In a rising price environment, a 24-month contract locks in today's lower rate and protects you from future increases. In a falling price environment, a 12-month contract lets you reprice at lower rates sooner. Nobody knows for certain which direction prices will move, which is why most advisors lean toward locking in moderate-length terms when prices are at or below historical averages.
ETF Risk and Operational Uncertainty
If your facility might close, be sold, or see significant usage changes within two years, a 12-month contract reduces ETF exposure. An early termination on a 24-month contract with 18 months remaining can carry substantial fees — sometimes calculated on remaining contract value. Shorter terms reduce this tail risk.
Our Approach: Price Both, Compare
We pull competing quotes for both 12 and 24-month terms simultaneously from every supplier. You see the pricing difference and make a decision with full information rather than one supplier's recommendation. Sometimes the price difference is negligible; sometimes 24-month pricing is meaningfully higher.
Frequently Asked Questions
Is there a price difference between 12 and 24-month contracts?
Typically yes, but it varies by market conditions. In a normal market, longer-term fixed rates are priced slightly higher to compensate suppliers for bearing more risk. In a period of expected price increases, suppliers may price 24-month contracts aggressively to lock in future revenue.
Can I extend a 12-month contract to 24 months before it expires?
You can execute a new contract for any future term. Extending before expiration essentially re-prices you at current market rates for the new term — you'd want to verify current pricing is favorable before locking in early.
Do longer contracts reduce the broker's fee?
No. Broker compensation is typically a per-kWh fee consistent across contract lengths. Longer contracts mean more total fee over the term, but the per-kWh amount is typically the same regardless of length.
What if my business closes before the contract expires?
Early termination fees (ETFs) apply if you close before contract expiration. ETF structures vary — some are flat fees, others are calculated on remaining contract value. We disclose ETF terms before recommending any contract.
Which term do most commercial businesses choose?
24-month contracts are the most common choice for commercial accounts in stable operational situations. They reduce procurement frequency, provide two years of budget certainty, and the pricing premium over 12-month is often modest.