What is index pricing? 

Many business energy contracts are based on offering a fixed unit rate, with changes in wholesale energy costs and variable industry costs priced in. Fixed contracts also usually carry the risk of volume tolerance charges, which are applied if a business uses more or less energy than forecast over the term of the contract. 

In comparison, index pricing offers far more flexibility and transparency. Prices are calculated a day ahead and more closely reflect wholesale market rates. Industry costs such as Transmission Network Use of System (TNUOS), Distribution Network Use of System (DNUOS) and Climate Change Levy (CCL) charges are also passed through to the customer.  

Index pricing is usually only offered to half-hourly customers that consume large amounts of electricity. Good Energy are offering it to customers that consume smaller amounts of electricity but could nevertheless benefit from increased transparency over the charges that make up their energy bill. This includes renewable generators that consume variable amounts of electricity depending on weather conditions and have similarly flexible agreements in place for selling their power.  

What are the benefits of index pricing?

Index pricing allows customers to take advantage of drops in wholesale energy costs. While it also means prices can rise due to changes in the market, index pricing may still be preferential to out-of-contract rates or a higher cost fixed tariff, which would be priced to take into account the current volatility of the wholesale energy market.  

Other benefits include: 

  • Matching the shift.
    If you sell electricity as well as buy it, you can match the shift in prices that you receive for the power you generate. 
  • This is a flexible contract with no end date.
    You will be free to switch to another tariff if you want to (for example, when market volatility improves and we are able to offer new fixed tariffs).
  • No volume tolerance charges.
    As we won’t have to buy your energy in advance and offer it to you for a fixed price, you will only ever pay for the electricity you consume.
How can I switch to index pricing? 

If you’re interested in switching to index pricing, please get in touch with the Good Energy business sales team on 0800 254 0021 or email business-sales@goodenergy.co.uk