Everybody asks the same question: should I fix?
It's the wrong question, or at least an incomplete one. The better version is: what happens if I'm wrong? That reframes procurement as a commercial risk decision rather than a market prediction - which is what it actually is.
The three strategies
There are, broadly, three ways to buy electricity:
Fixed - agree a rate now, for a defined period, and it doesn't move regardless of what the wholesale market does afterwards.
Flexible - buy in stages over time against a live market, rather than locking in one rate on one day.
Layered, or hybrid - a structured mix of the two, buying portions at different points rather than committing everything at once or leaving everything exposed.
None of these is universally best. Each manages risk differently, and the right one depends on what an organisation can actually tolerate, not on which strategy performed best last year.
What happens in different markets
The honest way to compare them isn't history - it's illustration. Consider four different market conditions after a contract starts: prices rise, prices fall, prices go essentially nowhere, or prices become volatile without a clear direction.
A fixed contract looks brilliant in a rising market and painful in a falling one. A flexible position does the opposite. A layered approach rarely produces the best outcome in any single scenario - and that's the point. It's not designed to win, it's designed to avoid losing badly in any of them.
Why nobody knows
Nobody knows where wholesale prices will be in twelve months. Not suppliers. Not brokers. Not traders. Not consultants.
Anyone claiming certainty about future prices is selling certainty, not providing it. That's not cynicism - it's simply true, and worth saying plainly, because a surprising amount of procurement advice is delivered with more confidence than the underlying market justifies.
What organisations often overlook
The technical merits of fixed versus flexible get most of the attention. The organisational side usually gets less - and it often matters more:
- How the decision gets reported to the board
- How it fits the annual budgeting cycle
- Whether procurement policy actually permits a flexible approach, or assumes fixed by default
- Who has delegated authority to commit, and at what threshold
- The cash flow implications of each approach
- How much uncertainty the organisation - and the people making the decision - can genuinely tolerate, not just on paper
A technically optimal strategy that nobody in the business can actually stand behind if the market moves against it isn't a good strategy. It's a good spreadsheet.
Layered buying
This is where the more interesting middle ground sits. Buying in stages - at different points, at different prices - can reduce exposure to any single market moment, without claiming to guarantee a lower price than fixing everything at once would have achieved.
The principle is straightforward: don't put every decision in the same place on the same day. The execution - how many stages, how they're timed, how much to commit at each point - is where the judgement actually lives, and it looks different for every organisation depending on volume, risk appetite and contract timing.
The right answer
The right procurement strategy isn't the one that turns out cheapest in hindsight. Hindsight isn't available at the point the decision has to be made.
It's the one your organisation can genuinely justify before the market moves - one that fits its risk tolerance, its governance, and its ability to live with the outcome, whichever way the market actually goes.
Somerford doesn't have a house view on fixed versus flexible, because there isn't a universally correct answer to give. We help organisations work out which approach genuinely fits their circumstances, and build a procurement strategy they can stand behind either way. If that conversation would help, get in touch.