Why We Recommend Shorter Contracts in 2026 (And When We Don’t)

In 2026, Telnergy Is Recommending 12–18 Month Contracts for Most New Clients. Here’s the Exact Reasoning — and the Conditions Under Which We Don’t.

Our contract length recommendation is not a fixed house view. It is a dynamic position that changes with market conditions, forward curve structure, geopolitical risk signals, and the individual client’s circumstances. In 2019, we were recommending 24–36 month contracts to most clients because the forward market was in backwardation — near-term prices higher than forward prices — making longer locks attractive. In 2022, we recommended the opposite: short contracts or rolling month-to-month cover while the crisis peak normalised.

In 2026, we are in a market that is neither in crisis nor in the comfortable low-price equilibrium of 2018–2020. It is a structurally elevated, geopolitically sensitive, storage-constrained market where both upside and downside risk exist simultaneously. Our current position, and the reasoning behind it, is worth explaining transparently.

Why We Currently Favour Shorter Contracts

The forward curve structure in 2026 does not strongly reward longer tenors. In a backwardated market — where near-term delivery prices are higher than 12 or 24-month forward prices — there is a genuine financial incentive to lock in a longer contract, because you’re securing a price below where the near-term market sits. In the current market, the forward curve is relatively flat to modestly upward sloping (contango). The 24-month forward price is not meaningfully lower than the 12-month forward price. The financial reward for locking in a longer contract is therefore limited.

When there is limited financial reward for the longer term, and meaningful uncertainty about where prices will be in 18–24 months, the rational position is to take the shorter contract and preserve the optionality to re-contract at potentially better rates when the picture is clearer.

European storage recovery in 2026 creates a potential downside scenario for gas prices. If the 2026 injection season proceeds well — if LNG supply is adequate, if Norwegian production runs consistently, and if the summer is mild enough to moderate demand — storage could enter winter 2026 in a strong position. Strong storage = lower winter risk premium = lower forward prices for 2027 contracts. A business that locked in a 24-month contract in early 2026 would miss that repricing opportunity.

Geopolitical uncertainty creates an asymmetric risk profile. The downside scenarios — Hormuz escalation, Norwegian outage, cold early winter — are individually low probability but collectively significant. If any of them materialise during a short contract term, the business is exposed at renewal. But the same is true of a long contract: if prices fall during the term, the business is locked in above market. In an uncertain environment, we generally prefer the exposure to be short-duration on both sides.

The Specific Conditions Under Which We Recommend Longer Contracts

Shorter isn’t always right. There are specific client circumstances where we recommend 24-month or longer contracts in 2026.

Businesses for whom cost certainty is non-negotiable. Hospitality businesses, care homes, and other operators with thin operating margins and limited ability to absorb mid-year cost increases have a genuine need for multi-year price certainty that outweighs the market optionality argument. For these clients, the management and financial benefit of knowing their energy cost for two years is worth the premium over a shorter contract.

Businesses approaching significant capital decisions. A business planning a major expansion, refurbishment, or equipment investment needs predictable overhead costs to model the investment case confidently. Locking in energy costs for 24 months removes one variable from a complex capital planning equation. The cost of the certainty is justified by the decision quality it enables.

Multi-site businesses consolidating to a single renewal date. If we’re aligning a portfolio of sites to a common renewal date, the alignment contract for sites whose current contract expires before the target date may need to be 15–18 months rather than 12 months to achieve the alignment. The correct contract length here is driven by portfolio management logic, not market analysis.

When the forward market moves into genuine backwardation. If the market structure changes — if a supply event drives near-term prices significantly above forward prices — the case for fixing longer contracts strengthens materially. We monitor this continuously. When the signal is there, our recommendation changes.

What Clients Sometimes Ask: “Shouldn’t We Lock in Now Before Prices Rise?”

This question — versions of which we hear frequently — reflects a reasonable concern but an incomplete analytical framework. It assumes that the risk of prices rising is greater than the risk of prices falling or staying flat. In the current market, that assumption is not clearly supported by the forward curve or by supply/demand fundamentals.

The honest answer: no one knows whether energy prices will be higher or lower in 18 months. Anyone who tells you they do with confidence is overstating their foresight. What we can do is assess the market structure, the risk indicators, and the forward curve, and make a reasoned recommendation about which contract length offers the better risk-adjusted outcome for your specific situation.

What we don’t do is recommend longer contracts because they generate more commission — a longer contract generates proportionally more broker income per deal. Our commission structure is fixed per deal regardless of contract length. Our recommendation on contract length is therefore not influenced by our own income, which is the way it should be.

The Renewal Frequency Trade-Off

Shorter contracts mean more frequent renewals. More frequent renewals mean more management time and more exposure to the renewal timing risk — the risk of having to renew during a market spike. This is a genuine consideration and one that factors into our recommendations.

For clients with strong process discipline — who commit to starting each renewal 6 months ahead of expiry and who have a reliable broker managing the process — the renewal frequency of 12-month contracts is manageable. For clients who have historically struggled to engage with renewals proactively, the management simplicity of a 24-month contract may be worth the market optionality cost.

This is a client-specific judgement, not a universal rule.

The Current Telnergy Recommendation Framework

• Standard SME, no specific requirements, flexible business model: 12 months. Re-assess at renewal based on market conditions at that time.
• Hospitality, care, thin-margin operators: 24 months for cost certainty. Review contract length at each renewal.
• Multi-site portfolio alignment: Contract length determined by alignment target, not market analysis.
• Businesses with upcoming capital decisions: 24 months to lock down overhead costs for investment modelling.
• Large consumers with flexible procurement capability: Not a fixed-contract recommendation at all — a flexible procurement discussion.

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Telnergy Limited • Independent Energy Consultants since 2002 • Ofgem TPI Registered • Christchurch, Dorset