Ofgem to rate green energy tariffs

Businesses signing up to green energy tariffs could find it far easier to sort between those delivering real environmental benefits and those accused of greenwash from next year, after Ofgem yesterday unveiled plans for a tariff rating system.

Under the voluntary scheme, both business and domestic green tariffs offering electricity produced wholly from renewable sources would be independently verified and accredited. Meanwhile, an accompanying rating scheme, similar to the A to F energy efficiency ratings used for electrical appliances, would rate all other tariffs based on their carbon emissions.

Green tariffs have been the subject of considerable controversy in the past year, with several energy providers accused of overstating the environmental benefits of their schemes. A recent National Consumer Council (NCC) report into the burgeoning number of green tariffs available claimed that a lack of standards and accreditation meant many customers were left confused by green tariffs that offered limited carbon savings.

"Currently, customers find it difficult to compare the environmental benefits of the various energy deals on offer," said Ofgem chief executive Alistair Buchanan. "The new rating scheme will eliminate confusion and encourage customers to seek deals that best meet their needs, and will give suppliers more incentives to innovate and develop new tariffs and products."

Ofgem said that the draft guidelines, released yesterday, would be finalised early next year, at which point suppliers signing up to the scheme would be obliged to develop an independent certification scheme for renewable energy. It added that it hoped this process would last no longer than six months, ensuring that the accreditation and carbon rating labels could be available to be used on energy firms marketing material by the end of next year.

The proposals were broadly welcomed by the energy industry, with the Energy Retail Association claiming it fully supported the idea of a voluntary verification scheme to help deliver greater clarity to the market.

A spokeswoman for energy giant npower also signalled the company's support for the guidelines, claiming it recognised the "need for greater transparency and clarity of green tariffs to engage consumers with a more informed choice".

Similarly British Gas said the guidelines were a "step in the right direction ", but claimed that it was too early for the company to definitely commit to signing up to the scheme.

Ofgem said that although it remained unclear how many energy companies would sign up to the voluntary guidelines, it expected market pressures to drive a high level of take up. "Once the ratings and accreditation are available, very few customers with an interest in green tariffs will sign up to a supplier's offer unless they see it is independently verified," said a spokesman for the watchdog.

However, both the National Consumer Council and energywatch said customers would require more information about how the rating system operates, noting that there needed to be a clearer definition of what constitutes a "low carbon" energy source.

"We called for new guidelines and independent accreditation of green energy claims, to make suppliers come clean about how 'green' their energy really is," said Cassie Higgs, senior policy advocate at the NCC. "Ofgem has accepted the need for such guidelines, which is welcome. But many consumers could still be confused if the information isn't easily understood."