How market-linked pricing works, who it suits, and the questions to ask before you commit.
Your business energy contract is up for renewal, and alongside the fixed-rate offer is something different: a market-linked contract. For commercial customers, having a market linked energy contract explained in plain English can make all the difference.
Key highlights
- Pricing tracks NEM wholesale spot prices, settled every 5 minutes
- Rates are reviewed regularly, e.g. monthly or quarterly
- Suits businesses that can shift usage or absorb variable bills
- Trade-off: potential savings vs. less certainty
- Ask about reviews, caps, exit fees and reporting
What does preparing for a market-linked contract look like?
Unlike a standard fixed-rate plan, a market-linked contract ties your energy price to the wholesale market, so your rate can move up or down over the agreement. Preparation is about understanding your exposure before you sign.
Your action checklist
- Understand how often your rate will be reviewed
- Model a worst-case scenario for high wholesale prices
- Assess whether you can shift usage to lower-demand periods
- Check your cash flow flexibility for variable bills
- Prepare your questions for the retailer (below)
Why choose a market-linked contract?
Your bill usually reflects the average wholesale price for the billing period, plus network charges, environmental scheme costs and a retail margin. As a guide, wholesale energy makes up around 30–40% of a typical bill and network charges around 40–50%. Because wholesale prices respond to supply, demand and weather, rates can shift noticeably between billing cycles.
These contracts tend to suit businesses that can shift some energy use to lower-demand periods, or that have the cash flow flexibility to absorb a variable bill. Larger commercial customers with dedicated finance teams often find the potential upside worth the complexity.
Is a market-linked contract doable for your business?
Key takeaways
- Potential savings come with less certainty
- Model a worst-case scenario before you commit
- Clear contract answers make budgeting easier
Market linked energy contract explained, clause by clause
| Question to ask | Why it matters |
| How often is pricing reviewed? | Sets how quickly your rate can change |
| Are there caps on how high the rate can go? | Limits your exposure to price spikes |
| What exit fees apply? | Affects your flexibility to switch |
| How will usage data be reported? | Helps you monitor and budget |
Market-linked contracts: what’s next?
The trade-off for potential savings is less certainty. Get a clear answer to each question above, model a worst-case scenario, and you’ll be in a much stronger position to decide and budget with confidence.
About CovaU Energy
CovaU Energy is a 100% Australian-owned company providing electricity and gas to homes and businesses across Australia. We offer competitive energy plans, top-rated 24/7 customer service, and no lock-in contracts. We also have incredible rewards for our new and existing customers. For more information about our electricity and gas plans, call 1300 111 688 to talk to our energy specialists or request a quote for the rates in your area. You may also compare plans and sign up here directly.
