Green energy tariffs to get cheaper

One of the UK's leading providers of green energy has today announced that it is to cut its tariffs and predicted that other providers could soon follow suit.

Good Energy said that will cut its standard electricity and gas tariffs for both business and domestic customers by 7.5 per cent from the end of this month. The company said that the move would save the average domestic dual fuel customer £62 a year.

Juliet Davenport, chief executive of Good Energy, said that the company was due to start paying less for its renewable power in 2009 and was now looking to pass that saving on to customers.

The drop in renewable energy prices has been prompted by cuts in wholesale electricity prices, which have fallen around 40 per cent from last year's peaks as a result of plummeting oil and gas prices.

"The price of renewable energy on the grid is worked out as a premium on wholesale electricity prices to cover the higher balancing, transmission and distribution fees charged for renewable power," explained a spokesman for Good Energy. "Those fees are proportionate to the wholesale price of electricity so when the cost of fossil fuel-based power drops the cost of renewable energy and the green tariff premium also fall."

He predicted that other providers of green tariffs would follow suit and drop their prices over the coming months as operators responded to lower wholesale prices. "We should see all energy tariffs drop over the next few months and green tariffs should drop across the board," he said.

A spokeswoman for rival green energy provider Ecotricity said that the company operated a different pricing model to Good Energy where it did not charge customers a green tariff premium and instead matched the prices offered by the "Big Six".

"Philosophically, we took a decision not to charge a premium for green energ y," she said, adding that Ecotricity's model worked by reinvesting the bulk of its revenue in building new renewable energy capacity.

She said that the company would drop its prices when the "Big Six" lower their tariffs – a move that experts are predicting for the next few months.

Good Energy said it was moving to reduce its exposure to fluctuating wholesale electricity prices, which can lead to customer frustration when they see green energy prices increase in line with the cost of fossil fuel-based energy. The company said it is increasing its direct relationships with over 500 independent renewable energy generators and is also investing in its own wind farm in Cornwall, which should help reduce the impact of future changes in oil and gas prices.