Why a good unit rate does not equal a good energy procurement strategy

The focus on unit rate is understandable. It is visible, measurable, and easy to defend internally. For years, it offered a simple way to demonstrate control in an inherently volatile market. The problem is not that unit rate matters. It’s that it has become a proxy for something much bigger.

Energy buying has evolved faster than the way it is judged. What once worked as a reasonable shorthand for value now captures only a fraction of the decision being made. The rest sits in the structure of the contract, the assumptions behind it, and the level of risk the business has implicitly agreed to carry.

A unit rate describes the price of the commodity (power or gas) at the point it is agreed. It says very little about how that price will behave once the contract is live. It doesn’t explain how costs will move if volumes change, if operations shift, or if markets behave differently to forecast. It doesn’t show where risk sits between the business and the supplier, or how much exposure has been accepted in exchange for a headline price.

This isn’t a discussion about regulated or non-commodity charges that sit outside procurement control. Those matter, but they behave differently.

This is about the part leadership teams actively decide how to buy the commodity itself and how much risk they are prepared to carry around it.

That’s why two businesses can secure the same unit rate and experience very different outcomes over the life of a contract. One will see stability and predictability. The other will see variance, surprises, and growing frustration, despite having “done the right thing” at the point of purchase.

For many businesses, fixing energy costs feels like a responsible decision. It offers budget certainty, removes exposure to volatile markets, and is easy to explain at board level.

But fixing a unit rate is not a neutral act. It is a deliberate decision to exchange uncertainty for commitment.

When markets rise, that decision looks smart. When markets fall, the same unit rate can quickly feel like a poor outcome, even though nothing went wrong in the procurement process. At that point, frustration often sets in. The focus shifts to whether a better deal could have been achieved, rather than whether the risk position was ever clearly defined.

This is why hindsight criticism of energy decisions is so common and so unhelpful. The issue is rarely that the price was “wrong”. It’s that the business never explicitly agreed on what it was trying to protect against in the first place.

A unit rate only has meaning in the context of the contract structure behind it.

In a fully fixed contract, the unit rate reflects a deliberate trade-off between price and certainty. In flexible arrangements, it is often an average of past buying decisions not a guarantee of future cost behaviour.

And in pass-through contracts, while the commodity price may be fixed, non-commodity charges move in line with current market and regulatory costs. Any increases are felt immediately.

In all three cases, the same unit rate can produce very different outcomes. Without understanding where volatility sits and how it is managed, the unit rate becomes a headline without context.

The consequences of rate-led procurement decisions rarely show up straight away. They emerge over time.

Costs become harder to explain month to month. Budgets drift despite unchanged consumption. Forecasts need constant adjustment. Finance teams lose confidence not because the market is volatile, but because the strategy was never designed around how the business actually wanted energy costs to behave.

At that point, procurement becomes reactive. Attention shifts from managing exposure to managing expectation.

Strong businesses treat energy procurement as a risk management decision first, and a pricing decision second.

They start by understanding where certainty genuinely matters and where flexibility creates value. They recognise that operational behaviour influences exposure, and that technical constraints limit what procurement can realistically achieve.

In that context, price becomes an input into a broader decision, not the decision itself.

By the time leaders start questioning whether a “good deal” was actually a good energy procurement strategy, the contract is already in place.

The opportunity is not to secure a better unit rate next time. It is to design decisions around how the business wants energy costs to behave in the first place – in rising markets, falling markets, and everything in between.

Because resilience is not achieved by buying well once. It is built by making deliberate, informed risk decisions and revisiting them as conditions change.