Applicable to both Fixed and Flexible energy contracts, a ‘Pass Through’ contract is just the way the Non Commodity Cost (NCC) element can be priced. NCCs are now the majority share of your unit rate, making up between 60-65% of the charge, while the commodity (the energy) is now the smaller portion. The energy can be Fixed or Flexible.
WHAT ARE THEY?
Visit our page here for the different types of NCC.
The different NCC charges are known at different times of the year; therefore some are published prior to getting your contract, some throughout and some at the end. This makes it hard for both suppliers and users of energy to know exact costs.
So, whereas in a Fixed contract all costs elements are fixed, therefore your NCCs are locked in for the contract duration at a set rate that will include a risk margin so the supplier is no left out of pocket, in a Pass Through those that are known are passed through at the published rate, whereas those that aren’t yet published in the public domain will be passed through at a suppliers forecast.
Different suppliers treat charges published after the fact differently, some reconcile and some do not.
Clients wishing to go for a Flex contract can have the NCC elements fixed or pass through depending on their requirements.
Points to consider
- Get the going rate: you know what you’ll be paying if the charge is published
- Minimal uplift: with some charges known, there will be only be minimal risk added by suppliers for the charges that aren’t published yet
- Change: These charges can go up during your contract so you may end up paying more than the previous rate
- Same for all: The government can withdraw or add in policy charges at any time - all suppliers will be contractually covered for this. This applies to fixed and pass through NCCs