Should I fix my energy bills for my restaurant? BANK OF DAVE replies

I have a restaurant on the south coast. I need to sign a new electricity contract, and all the brokers I’ve spoken to are proposing a fixed three-year term – they all individually predict that corporate energy prices will continue to rise until 2025/26.

I’m not sure what they’re basing it on and I’m not sure I should take the plunge on their advice.

I hate being pressured for so long to fix, but I also have no idea where business energy costs go.

Dave Fishwick, This Is Money’s company doctor, replies: The wholesale price of gas has fallen dramatically in recent months and, at the time of writing, is less than a third of its August 2022 high.

Similarly, oil prices have fallen dramatically in recent months.

Although these are gas and oil prices and not electricity generated from different sources, the general picture in the energy market should follow approximately the same course.

The price spike caused by the government’s response to the pandemic and conflict in Ukraine has receded and supply restrictions have eased. The government energy bill relief scheme has been extended until April 2024, but the government expects energy prices to fall in the second half of 2023.

However, as we often see with petrol and diesel prices, they seem to shoot up like a rocket, but float down like a feather.

The reasons for delayed declines are usually given as wholesale energy companies hedging their bets on future prices, just as you are considering doing. Yet Britain’s largest energy producer did report record profits in 2022.

Personally, I’d like to see energy giants taxed more and the extra money used to help with the energy bills of all those who are struggling, hard-working families, retirees and small and medium-sized businesses.

It seems that the energy brokers are trying to make a big commission by trapping unwary customers in expensive contracts before prices return to normal.

There is always a risk that external events will push prices back up.

An escalation of the war in Ukraine, between China and Taiwan or problems in the Middle East could push wholesale prices back to 2022 levels. But barring such a catastrophe, I don’t see any reason why prices continue to rise until 2025/6 , except for more profit in the energy industry.

In the long run, prices could rise as we see the cost of low-carbon policies add to energy bills. The green power levy has been in effect for some time and adds about 8 percent to the bill. However, this will probably be a gradual increase.

You should have a contract for your commercial power supply as out of contract prices are expensive, but I wouldn’t be happy to commit to a three year contract unless you are happy with the price. Look around for the best deal online and through energy brokers.

I also called some dear friends of mine, Zack and Catherine, who own a family restaurant similar to yours. It’s called the Well Springs in Sabden, Lancashire, and I asked them what their energy plans are.

Catherine said: ‘Energy prices are falling and I understand they could fall again in June. I’ve just been quoted, fixed at 26 pence per unit for three years. My deal expires at the end of July and I am currently paying 17 pence per unit.

“It will never be that low again, but I’ll wait until June before doing anything because I’ve been told it’s going to go down a bit. Last year’s deals were 90 pence per unit, and a lot of people were sadly fixated on that. I have independent contacts who tell me this.’

I hope that helps a bit.

My personal view is that at this point I would be reluctant to fix anything for more than 12 months because I think next year around this time next year we will have a clearer picture of where energy prices and the economy are going, but on the in the course of this year they should go down.

Good luck!