What is a pass-through electricity contract?
A pass-through electricity contract bills some third-party costs separately from the energy price. Ofgem's 2023 business research distinguishes this from flexible purchasing, where energy is bought at different times [S1]. Your site needs to check which network, metering and policy costs can change, even when the energy rate is fixed. Checked October 2026.
What does pass-through mean on an electricity contract?
A pass-through electricity contract passes specified third-party costs from your supplier to your business as separate bill items [S1]. Why it matters for your site: a fixed energy price can sit beside charges that move. Read how business electricity contracts work for the wider contract types.
Ofgem’s research separates pass-through charging from flexible purchasing. Flexible purchasing concerns buying energy at different times; pass-through concerns recovering third-party costs [S1]. Ask which description applies to each part of your agreement rather than treating the words as interchangeable.
How does it differ from a fixed electricity contract?
A fixed-rate agreement sets a unit price for its term, although Ofgem warns that some agreements allow changes under stated conditions [S2]. Business costs can be recovered through unit rates, standing charges or separate pass-through items [S3]. Request a schedule showing what is included before assessing the total.
For an illustration, not a quote, assume a workshop uses 1,000 kilowatt-hours (kWh), a measure of energy. Assume its energy rate is £0.20/kWh and a separately billed network rate changes from £0.02 to £0.03/kWh. Energy remains 1,000 × £0.20 = £200; the assumed network line moves from £20 to £30. The difference is £10 before other charges and tax. These inputs are assumptions, not market prices.
What should you read before accepting pass-through terms?
Request the charge list, calculation basis, adjustment dates, supporting evidence and reconciliation process. Mark whether credits follow downward adjustments. Ask your solicitor to check unclear variation or exit clauses.
Use business electricity price data for context, rather than substituting a national average for your contract.
Next step
Use cut energy costs to plan your project, then get matched with an installer that covers your area.
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Common questions
Which third-party costs can be passed through?
Ofgem lists network charges, agent costs and government levies as examples. Identify the actual items in your contract schedule [S1].
Does a fixed unit rate fix the total bill?
No. Consumption still changes the bill, and Ofgem warns that some fixed-rate contracts contain conditions allowing rate changes. Read the exceptions [S2].
Must there be a separate standing charge?
No universal layout applies. Ofgem describes business contracts that recover site costs through pass-through items rather than a specified standing charge [S3].
Can a supplier add a charge without explaining it?
Request the contractual clause, billed quantity and calculation. Ofgem distinguishes separate pass-through items from the energy rate; the label alone does not establish your liability [S1].
Is there a cooling-off period after agreeing business energy terms?
Ofgem says there is no cooling-off period after agreement. Obtain the written terms before acceptance and check disputed obligations with your solicitor [S2].
Ask about your site
Sources
- Businesses' experiences of the energy market 2023, Ofgem,Last checked 19 October 2026
- Get a business energy contract, Ofgem,Last checked 19 October 2026
- Standing Charges - Call for Input, Ofgem,Last checked 19 October 2026