Swathes of small businesses operating Musgrave franchises were left facing huge energy bill hikes after supplier Energia ended a deal with the supermarket group last year, it has emerged.
Energia had a contract negotiated with Musgrave to supply electricity at favourable rates to many SuperValu and Centra stores owned by the supermarket chain’s franchisees.
The deal ended in the final months of last year, leaving store owners facing big hikes in energy costs, a key expense for retailers.
Franchisees say that suppliers hit them with increases that saw their electricity bills as much as treble following the end of the contract.
One store owner said its bill in December, when electricity prices peaked, went from €3,000 in 2021 in €9,000 last year, while the unit cost that month trebled to more than 40 cent a kilowatt hour (kWh).
While those costs would not have applied every month, franchisees point out that high energy bills still threaten the viability of their businesses, which rely heavily on refrigeration. “You need electricity around the clock,” one pointed out.
The increases left retailers more exposed to movements in wholesale prices, which rose for a period through November and December last year after dropping from record highs in August.
Wholesale prices remain at multiples of their pre-Covid levels following more than a year of increases driven by demand and the impact of the war in Ukraine.
Energia said that it did not comment on individual clients, but added that it strove to provide the most competitive prices to all customers.
The company added that it was monitoring wholesale electricity and gas prices on a continuing basis.
[ Electric Ireland business prices falling but no good news for domestic usersOpens in new window ]
Musgrave said that the company and its independent retailers negotiated with suppliers to get the best energy deals possible to protect their businesses.
“Given international market conditions last year and this year, as contracts came up for renewal, the average energy bill for retailers increased very significantly,” said the company.
Musgrave added that it continued to work with energy companies to secure the best deals possible for franchisees, but could not comment on these talks. The company’s statement did not name any energy supplier.
The franchiser also pointed out that retailers faced high energy costs without reprieve all year round as their businesses rely heavily on refrigeration, air conditioning and kitchens. Energy is generally the highest cost that grocers face after labour.
“Musgrave has welcomed the temporary business energy support scheme and continues to stress the need for ongoing Government support for our retail partners facing many cost-related challenges,” the company said.
ESB subsidiary Electric Ireland this week cut small and medium-sized businesses’ electricity bills by 10 per cent, following more sustained falls in wholesale prices.
The State-owned company’s reduction will apply to most businesses up to those classed as large energy users, which include big manufacturers, technology and data centres.
Electric Ireland did not cut residential bills and would not comment on when this was likely to happen.
Energy suppliers face increasing pressure to reduce their charges to both homes and small businesses following wholesale price declines.
