Energy “Holdover Rate” — And Why It Could Be Costing You Money

When your energy contract expires, your rate doesn’t just end – it changes. Sometimes quietly, sometimes dramatically. In many cases, commercial customers who haven’t renewed or negotiated a new energy supply agreement find themselves paying what’s called a “holdover rate,” a temporary variable rate charged by a supplier after your contract ends. Though it keeps your energy flowing, it can also cost your business much more than planned.

What Is a Holdover Rate?

A holdover rate, also called a rollover rate, is the price you pay for energy when your existing supply contract lapses without renewal. Your supplier continues to serve you, but because you’re no longer under contract, your costs follow short-term market prices rather than fixed forward rates. Those prices can swing widely with changes in demand, fuel costs, or grid conditions.​

Holdover rates exist to protect suppliers against the unpredictability of serving customers with no committed term. For businesses, however, this can lead to unplanned spikes and budget uncertainties sometimes immediately after a contract expires.

Why Holdover Rates Cost You More

It’s no surprise that the wholesale energy market is constantly in motion. Suppliers plan their purchases months, and often years, in advance to serve contracts at known fixed rates. However, when a business ends up on holdover, the supplier must procure power at current market prices – often on short notice. To cover that risk, they typically charge a premium—sometimes several cents higher per kilowatt-hour than your previously negotiated rate.​

That means even if your energy usage doesn’t change, your costs can rise sharply. Commercial businesses operating in energy-intensive sectors—such as manufacturing, food service, and data centers—can feel the impact within a single billing cycle.

What Causes a Holdover Rate?

Holdover rates can sneak up on you and often kick in when:

• A contract expires before a new one is signed.
• The business assumes the supplier will auto-renew at the same rate.
• Expiration notices are overlooked amid daily operations.

Even a short gap can lead to months of higher bills before a new contract takes effect.

Why Market Timing Matters

Energy prices fluctuate based on seasonal changes, weather forecasts, and long-term generation expectations. Securing your next energy agreement when prices dip can lock in rate stability well before your renewal date. In energy procurement, timing isn’t about rushing - it’s about recognizing opportunity before your contract clock runs out.​

Think of your energy contract like a mortgage. During the fixed term, your rate is stable and predictable. However, once it ends—if you haven’t already locked in a new plan—you will move to an adjustable rate that can fluctuate with the market. Just like an adjustable mortgage often rises after the fixed period ends, a holdover rate keeps your power flowing but usually at a higher, more unpredictable cost. Securing a new fixed contract in a timely manner is the best financial move for your business.

How to Avoid Paying More Than You Should

The best defense against holdover rates is preparation. Here’s how to stay ahead:

• Track your renewal date. Mark it on your internal calendar so it doesn’t slip by.
• Stay in communication with your supplier or broker – especially if your operations or energy usage may change.
• Watch market trends. Work with an energy partner who monitors wholesale trends and can alert you when conditions are favorable.
• Confirm new terms in writing. Make sure your next contract starts on the day your current one ends to avoid any gaps.

Staying Ahead of Expiration

Managing your energy contract doesn’t have to be complicated, but missing a renewal can be costly. Holdover rates aren’t penalties, yet they often mean paying more for the same energy.

Catalyst Power^® helps businesses stay ahead by tracking the market, identifying the right moments to renew, and locking in terms that fit your goals. We keep your energy predictable – so you can keep your business running smoothly.