British businesses have been urged to consider energy deals that will be better for the company in the long run, rather than settling for short-term deals.
Energy Advice Line has advised that companies could be better off opting for longer-term fixed-price business electricity contracts instead of cheaper 12-month deals. Although these deals are generally more expensive in the short-term the savings could be significant in the long run as energy prices are expected to keep on rising.
Julian Morgan, managing director of the UK’s leading business electricity price comparison and switching service, said most businesses tend to be lured in by short-term deals because they appear much cheaper on paper compared to the two or three year contracts. “But they could be losing money by doing this,” he said.
Research by the comparison site found that 75% of customers went for 12-month contracts in the first quarter of 2012 because they offered the cheaper rate 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,” Mr Morgan said.
“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.”
Customers who would have taken a two-year contract at the start of 2012 would have paid 6.7% more for their electricity than if they had taken out a 12-month contract. However, as energy prices have increased by 15% between now and then, this would have been recouped with the added assurance that the rate will stay constant into the future.