Green energy provider Ecotricity is promising to keep its electricity prices frozen as households brace themselves for a round of price hikes from the ‘big six’.
Ecotricity has promised to freeze the price of its 100% green electricity tariff until 2014.
The green power provider has made the pledge amid rumours that the ‘big six’ energy giants are gearing up to announce price rises.
Last year each of the big six providers (SSE, Scottish Power, British Gas, npower, E.ON and EDF) announced price hikes, which they blamed on rising wholesale prices as well as the cost of implementing Government green schemes.
SSE was the first to drop the bomb in August 2012 and the domino effect saw British Gas, nPower, Scottish Power and EDF all rushing to reveal price rises in October with E.ON the last to put its cards on the table in December.
Many are speculating that British Gas will be first this year and will increase prices by up to 8%. It is expected the company will blame green levies and wholesale prices once again. The rise could take the annual average bill to £1,500 a year. But with energy companies like British Gas making big profits last year, households will find it hard to stomach above inflation increases.
So could green energy from Ecotricity be the solution for struggling households?
Green gets tough
Ecotricity is on a mission to undercut the big six energy providers as it tries to bring about an energy independent Britain.
Just a week ago the company said it would beat the standard electricity tariffs on offer from British Gas, npower, SSE, E.ON, Scottish Power and EDF, from 1st October. Read more in Ecotricity pledges to beat 'big six' on standard electricity prices.
And now it is promising to freeze the prices on its 100% green electricity tariff until 2014.
This move will make a modest reduction quite significant depending on how much the big six energy companies decide to hike prices by.
Dale Vince, Ecotricity founder, also pledged that if and when Ecotricity raise prices next year, it will be by less than the big six raise their prices in the coming weeks, to further widen the gap between Ecotricity and conventional energy companies.
Ecotricity can now undercut the standard brown electricity tariffs on offer with the big six. That’s because the company is self-generating more electricity than ever before through its expanding fleet of wind and sun ‘parks’, so it can start to set prices independently.
Unfortunately the same can’t be said for gas. Only 2% of green gas is produced by Ecotricity, primarily using food waste, and while it is the greenest gas in the country it’s not enough for Ecotricity to start rivalling the big six just yet.
However, Ecotricity reinvests its profits into building new sources of renewable energy. It claims to invest more per customer than any other energy company. So before long Ecotricity could offer both green gas and electricity for less than the price of brown and households will be shielded from price hikes altogether as they come to rely less on fossil fuels.
Cost of going green
Ecotricity offers two simple tariffs, Green Electricity and Green Gas, which you can combine to get a £15 dual fuel discount.
You can check what Ecotricity’s prices will look like in your area using the calculator on its website.
A household in South East London can get the Green Electricity tariff for £536 a year, which is £3 cheaper than EDF. With a Green Gas tariff the cost is £849 a year. Ecotricity can't undercut energy companies on gas prices just yet, but it does pledge to match what British Gas charges on standard tariffs.
Combined the cost of going green would be £1,370 a year after the £15 dual fuel discount. While this might be a few pounds cheaper than the standard deals on offer from the big six, it’s not the tariff to pick if you want to make significant savings.
The problem with standard tariffs
It has been estimated that as many as 12.6 million households are on standard brown energy tariffs in the UK. So in theory 70% of the country stand to benefit from Ecotricity’s price promise and price freeze on electricity, and get green for less than the price of brown.
However, standard tariffs tend to be poor value deals. Often households end up on standard tariff when a deal comes to an end and are put off from switching by the jargon and complicated tariffs on offer from energy companies. Ofgem's reforms (which we explain in Ofgem enforces new Standards of Conduct for energy suppliers) are helping to demystify the energy market and ensure we get a better deal by forcing energy companies to be simpler, fairer and transparent. But the full extent of these won’t be felt until 2015.
But if you are going to switch to save money on energy you could save more on one of these deals:
|
Tariff |
Average cost |
Savings vs typical bill* |
Type |
Notes |
Cancellation |
|
£1,139 |
£281 |
Fixed |
Fixed until 30th Sept 2014 |
£50 if you switch before end of fix |
|
|
£1,155 |
£265 |
Discounted variable |
Online billing. Paper bill available for extra £12 pa |
None |
|
|
£1,172 |
£248 |
Discounted variable |
4% discount on Sainsbury's Clear & Simple tariff rates until 31st July 2014 |
£30 per fuel until 31 July 2014 |
* Savings against an average bill of £1,420 as determined by Ofgem
All calculations are for an average usage dual fuel household paying by monthly direct debit. Average usage as defined by Ofgem is 16,500 kWh pa of gas and 3,300 kWh pa of electricity. Source: energyhelpline.com.
As you can see the cheapest deal on the market is the M&S Energy Fix & Save, which on average will cost £1,139. This is £231 less than the Ecotricity dual fuel deal.
Taking on the big six is a massive achievement for such a small company. But until Ecotricity can challenge the price of cheaper energy deals you are better off switching onto a fixed or variable deal rather than onto another standard tariff.
You can read more about Ecotricity in: The alternatives to the big six energy providers.
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