It’s a murky picture but Howard Weston, commercial energy broker at Midland Business Solutions, sheds some light on what shops can do to tackle rising energy prices
Where are we at with energy prices?
There is so much speculation but wholesale energy prices are still massively high, there are no two ways about it. Shops coming out of their contracts now aren’t going to get anything better than double their current rates. There may be slight fluctuations, but we’ve got to brace ourselves for at least another 18 months before we see any respite in prices.
Should shops coming to the end of a fixed contract look at agreeing to a new one?
This is an area that is causing some confusion because of what people are hearing in the news regarding home energy prices. Commercial energy and domestic energy are two completely separate entities. Regarding home/domestic energy, everyone knows there is no point being in a fixed rate contract as typically they are 30-50% more expensive than staying out of contract and on the variable rate, which is capped by the government. The commercial sector couldn’t be more different. Even though prices are massively higher at the moment, being out of contract for your commercial energy can be another 50-60% higher than being in a fixed rate contract. To keep it simple, your businesses must be in a contract.
You mention the price cap on domestic energy, can you see this introduced for commercial energy?
It would be a fantastic idea but I feel it’s very unlikely because it’s too big a hole for the government to fill. It’s something like eight times the National Health budget. Unfortunately, our energy strategy over the last 20 years has been really poor. We’re the fifth-largest economy in the world and we haven’t looked after our energy requirements, which means we rely on importing an awful lot of our gas and electricity and we are paying the consequences now.
What is your advice to shops coming to the end of a fixed contract?
I’m seeing a lot of brokers selling longer-term contracts, but it doesn’t sit comfortably with me to have customers agreeing to three or four year contracts while the prices are at the highest they’ve ever been. I would generally be happier with customers agreeing a two-year contract but, sadly, three year contracts are cheaper than two years, and one-year contracts are even more expensive so I understand it’s difficult when the figures are put in front of people. But certainly, if you’re planning long term, I think two years is a better option for most people at this moment in time.
Is there anything shops can do to tackle these price increases?
Unfortunately, there is only so much a business can do and I think a majority will be doing everything they can anyway. If you’re in a fortunate position to be able to afford it, investing in newer, more energy efficient equipment such as frying ranges and fridges will be a huge benefit. You can optimise your opening times and put LED light bulbs in but it’s only scratching the surface. Operators are swimming against the tide. There will be some shops who, through luck, came out of their contract last year, fixed for three years and are not being affected at all. But if you’ve come to the end of your contract in the last few months or you’re coming to the end of your contract in the oncoming months, you’re at the mercy of the market and you could be paying twice as much as your nearest competitor for your gas and electric, which could be the difference of £30,000 a year.
I’ve seen a few shops add solar panels, is this a realistic option?
I’ve dealt with the electric contract for a shop that has just put solar panels on their roof. It is a significant outlay but if you’re in it for the long term, if you own the building and you have the roof space, it’s something to consider because electricity is never going to come back down to the prices it has been in years gone by. The electricity you generate you can sell back to the grid – although it’s a pittance at almost a fifth of what you currently pay for it – so it’s best to use that to power your own business and cut your own bills.
What about an energy audit?
It probably wouldn’t be top of my list because it adds a further cost to a business and I think the majority of operators know where they’re using most of their energy. It may be worth some of the bigger shops or those run by managers to look at it as they might not be quite so aware. An alternative is to get an energy display monitor, which is similar to a smart meter but it’s a small screen that shows how much energy you’re using at particular periods. It doesn’t change things drastically, but it makes you aware of when you are consuming the most energy for you to potentially make small changes.
What should shops do if they get into trouble paying their energy bills?
If you run into problems, putting your head in the sand is the worst thing you could do. Speak to your energy company and ask to be put onto a payment plan because if you stop paying or get behind, you’ll get red letters and then what starts to happen is they put extra charges on – late payment fees, disconnection letters, which could be £100 – and it just makes the whole situation worse. Paying by direct debit is always the cheapest way to pay, but if you cancel your direct debit all you’ll do is end up paying up to 7% more. So speak to your energy supplier, they will want to work with you.