This isn’t about the benefit of hindsight, it’s about considering all the options and not just signing up to the cheapest short-term deal
UK firms should consider locking into longer-term fixed-price business electricity contracts instead of cheaper 12-month deals, according to the Energy Advice Line.
Two and three-year energy contracts were generally more expensive in the short term, but savings over the longer term could be significant as business energy prices were expected to continue to rise.
Julian Morgan, managing director of the UK’s leading business electricity price comparison and switching service, said most firms opted for fixed-term contracts of one year because they were cheaper than two or three-year deals.
“But they could be losing money by doing this,” he said. In the first quarter of 2012, 75% of customers went for 12-month contracts, as they were the cheapest price at an average of 9.58p/kWh for the quarter.
“But because business electricity prices have risen by 15% in that time, customers who locked into these cheapest deals would have been better off paying a premium and opting for longer-term contracts.
“These customers are now coming back onto the market because their 12-month deals have ended to find that business electricity prices are now 15% higher.”
Mr Morgan said that a customer who had taken out a two-year contract at the start of 2012 would have paid 6.7% more for their electricity than if they took out a 12-month contract. But as prices have since risen by 15% between now and then, the business would have recouped this and enjoyed the security of knowing their energy bills would not rise for a further year.
If the customer had agreed to a three-year contract, the savings could prove to be even more significant with business electricity prices expected to rise further.
“This isn’t about the benefit of hindsight, it’s about considering all the options and not just signing up to the cheapest short-term deal,” Mr Morgan said.
“We are strongly advising all our customers to consider the longer-term options, and our team can provide details about the various products available.
“The longer-term options will be slightly more expensive but the analysis from 2012 has proved that this might be the way to go in a rising market, and afford businesses greater price protection for longer.
“Our aim at the Energy Advice Line is to provide our customers with all the options so they have all relevant information they need to make a well informed decision.”
The Energy Advice Line is the UK’s leading commercial electricity price comparison and switching service exclusively for businesses, and enables firms to compare the market for the best possible business energy deals within minutes.
The free service is backed by a team of business energy experts who provide a complete contract management service including advice about business energy contracts, how to avoid expensive roll-over contracts and a renewal reminder service.
The Energy Advice Line also campaigns for a better deal for business energy users from suppliers and has lobbied the government and energy regulator Ofgem for greater protection from practices such as cold calling.
For further information visit www.energyadviceline.org.uk
Press Contact Details:
T: Mr Julian Morgan - 01202 636594
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