Pay nothing for your energy for two months!

Robert Powell takes a look at a new E.ON tariff offering two months of free energy, and asks whether this deal is really as good as it looks...

E.ON has certainly got its timing right.

Barely a fortnight ago, energy secretary Chris Huhne was attacking utility suppliers for their predatory pricing and complex tariffs. E.ON’s reply? A new tariff designed to ‘build trust, knowledge and engagement’ among its customers.

The two year deal – dubbed the ‘Energy Fit Plan’ – offers two months of free gas and electricity as well as a free energy monitor and energy efficiency advice service.

But is this tariff really as good as it looks?

Free months

The Energy Fit Plan is available to dual fuel and electric-only customers who pay by fixed monthly Direct Debit and manage their account online.

The tariff will cost an average of £1,150 a year for dual fuel customers*. That’s including the two free months of energy. These free periods are calculated 12 and 24 months after the plan’s start date. A Direct Debit will not be taken in these months. The free months are determined by working out 1/12th of the customer’s annual energy consumption in each year of the plan.

The plan has no exit fees. However, if you do move to another supplier before the two-year period ends, you will not be able to claim the free months. Should you move to another E.ON tariff before the plan ends, you’ll only receive a discount equivalent to the time spend on the Energy Fit Plan.

So far, so good – but there is a catch...

The catch

As the old adage goes; ‘nothing in this life comes for free’. And this new E.ON tariff is no exception. New customers on the Energy Fit Plan will not benefit from the 8% discount usually applied to dual fuel tariffs paid by Direct Debit. However the two months of free energy will slash 8.33% from the annual charge.

So in terms of the actual savings available using this tariff, the level is nowhere near the amount E.ON initially advertises. Moreover, the deal is not available to those on prepayment, Heatwise or restricted hours tariff meters.

So how does this new tariff compare to other deals out there at the moment?

Better deals

Even with the two months free, there are still tariffs that are cheaper than this E.ON deal. In fact, it’s not even E.ON’s best online tariff; the supplier’s Save Online 10 is around £50 cheaper per year.

Here are the best online tariffs around at the moment - remember the new E.ON tariff costs an average of £1,150 per year:

Source: energyhelpline.com – all tariffs are available from the lovemoney.com energy comparison centre.

As you can see, in comparison the E.ON deal is fairly reasonably priced, but there are still better online tariffs out there. EDF’s Energy Discount Plan v5 costs on average a full £126 less than the Energy Fit Plan. If you’re after a longer fix, npower’s Sign Online 24 will cost an average of £1,050 until 3 February 2013.

But that’s not to say that E.ON’s latest offering is wrong for everyone.

The tariff is part of a wider campaign waged by the supplier to get their customers ‘energy fit’. This includes an online survey and personalised dashboard to help you make your home more energy efficient. And obviously if you do opt for this tariff, you’ll get a free energy monitor to help you save even more.

However I’m still not wholly convinced.

Building trust

As I mentioned earlier, E.ON’s entire energy fit campaign is designed to ‘build trust, knowledge and engagement’ among their customers. Now – perhaps I’m overly cynical – but that translates to me as 'suave marketing campaign to win back a few customers after the relentless rate hikes'.

E.ON says that it launched the tariff after surveying 28,000 people and finding that what they really wanted was free energy. Well, don’t we all? But is introducing yet another type of tariff the best way to help households suffering from relentless energy hikes? I think not.

Ofgem is already concerned that tariff complexity is stifling the energy market. Surely E.ON’s Energy Fit Plan – marketed as new, but with pricing that’s anything but – is exactly the type of problem tariff the regulator is referring to.

E.ON’s push to get their customers saving energy should be applauded. Yet by rolling out another tariff with new rules, regulations and exemptions, E.ON is further contributing to the complex and confusing array of deals currently on offer.

What do you think?

Another energy gimmick or a welcome step forward?

Have your say using the comment box below.

*Average usage as defined by OFGEM is 16,500 kWh pa of gas and 3,000 kWh pa of electricity. Actual charges will vary by region and consumption.

** Against a typical bill of £1,300 after this round of price rises. Figures based on average usage as set by Ofgem for a dual fuel bill paid by monthly direct debit.

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