For UK businesses using over 1 GWh of energy a year, energy procurement is no longer a “compare and switch” exercise — it is a structured tender process with multiple suppliers, multiple contract structures and multiple decision gates. This guide explains how proper business energy procurement works in 2026, the different procurement models, and when to bring in a TPI vs run it in-house.
When does procurement replace comparison?
Roughly:
- Under 100k kWh/year: Comparison via broker or comparison site is sufficient.
- 100k-1m kWh/year: Annual fixed-price tender with 4-8 suppliers; usually managed via a TPI.
- Over 1m kWh/year: Structured procurement — flexible, pass-through, click-and-fix or basket trading. Either in-house energy team or specialist TPI.
The four main procurement models
1. Fixed-price tender
You issue an Invitation to Tender (ITT) to 4-8 pre-qualified suppliers. Suppliers respond with a single fixed price for the full contract term (1-5 years). You compare on total cost and pick a winner.
Best for: SMEs and mid-corporates with simple load profiles. Worst for: very large users with appetite for wholesale exposure.
2. Flexible / variable contract
You sign a multi-year framework with a single supplier. The supplier hedges wholesale on your behalf and you settle at wholesale + agreed margin. Suits sophisticated buyers with risk appetite.
3. Pass-through contract
You pay the wholesale unit rate plus all non-commodity costs (network, levies, supplier margin) as transparent line items. Used by larger businesses who want full visibility on what they are paying for and the ability to optimise individual cost lines.
4. Click-and-fix / basket trading
Multi-year framework where you “click” to fix portions of your demand at chosen wholesale prices over time. Lets you average into a price across the year or hedge specific delivery periods.
The procurement process step by step
- Data gathering: collect last 12-36 months HH consumption, MPAN/MPRN list, current contracts, ESG requirements.
- Strategy decision: fixed vs flex vs pass-through; contract length; renewable %.
- Supplier longlist: identify 8-15 pre-qualified suppliers for your size and segment.
- Pre-qualification: filter by credit rating, service capability, ESG fit.
- ITT issued: same questions, same data pack to all suppliers.
- Quote evaluation: total cost, contract terms, supplier risk.
- Negotiation: best-and-final-offer round on the top 2-3.
- Award: contract signed, change-of-supplier triggered.
- Mobilisation: ongoing reporting, billing validation, contract management.
In-house vs TPI — who should run procurement?
In-house procurement makes sense if:
- You have over 5 GWh/year and an internal energy manager.
- You want full control over the strategy.
- You can dedicate the time (typically 100-300 hours per renewal cycle).
TPI (consultant) procurement makes sense if:
- Your annual spend is under £500,000 (TPI fees worth it for the discount they unlock).
- You lack internal energy expertise.
- You want supplier benchmarking from someone who runs many tenders.
The big risk with TPIs is opaque commission — insist on the contract-and-fee transparency framework set out in the Ofgem-endorsed UIA TPI code of practice.
Common procurement mistakes
- Issuing the ITT at a bad time. Wholesale spikes during winter cold snaps or supply disruption events; quotes will be high and short-validity. Tender during shoulder months where possible.
- Insufficient supplier longlist. 4-8 suppliers minimum for genuine competitive tension.
- Ignoring non-price terms. Termination clauses, indexation triggers, security deposits and creditworthiness can all matter more than 0.1p/kWh.
- No backup if the winning supplier withdraws. Have a clear ranked second-place ready to accept.
- Letting the contract run unmonitored. 15% of large business contracts have billing errors in year 1.
Frequently Asked Questions
For annual energy consumption above 1 GWh/year, structured procurement usually beats simple comparison because of access to flexible and pass-through contracts. Below that, comparison through a broker is normally the more efficient route.
TPI fees for procurement support typically run 0.05-0.20p/kWh built into the unit rate (uplift) or 1-3% of annual spend on a transparent fee basis. For a 5 GWh business that’s £3,000-15,000/year — usually well covered by the unit rate savings the TPI unlocks.
Fixed procurement locks one price for the whole contract term. Flexible procurement keeps part of your volume open to wholesale movements during the contract, with structured triggers to fix portions over time.
Usually no — the cheapest gas supplier is rarely the cheapest electricity supplier, and most “dual fuel” discounts for businesses are marketing rather than meaningful savings. Tender them separately and pick the best of each.
End to end, allow 8-16 weeks from data gathering to contract signature for a fixed-price tender. Flexible and pass-through procurement can take 12-24 weeks because of the more detailed structuring work.
Need procurement support for a larger meter portfolio? Get a free 60-second initial review — we will tell you whether comparison or full procurement is the right route for your usage.
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