Interest rate-savvy homeowners who are used to weighing up the merits of fixed-rate mortgages against tracker deals will soon be making similar bets on energy prices to pay their fuel bills.
The government is to unveil a Green Deal bill by the end of the year, which will result in energy companies spending a total of £250bn over the next decade on the upfront costs of improving insulation on individual homes.
Measures will include fitting loft and cavity wall insulation, and energy efficient boilers, and may include solar panels and heat pumps.
The Green Deal, which allows consumers to shift the upfront costs of energy efficiency measures to suppliers, will be available from 2012.
Households that request the work will trigger a charge over 20 years that is fixed to the property, even after the first occupants move out.
The work will be paid for from the savings on the property's energy bill.
Under the government's 'golden rule', a household with an £1,500 annual electricity and gas bill could have £10,000 of work done under the Green Deal. Spread over 20 years, the £500 annual charge would be offset by the fuel savings, so the bill remains less than £1,500.
But if energy prices slump, households that have signed up to the Green Deal could be worse off than those who have not, in a similar way that those on tracker mortgages are benefiting from rock bottom interest rates, unlike those on long-term fixed deals.
Ann Robinson, the director of consumer policy at uswitch.com, said: 'You could say I will go for a punt on prices going up and go for a fixed deal. People will be a lot more aware about energy prices and how to manage their energy usage.'
She added that the Green Deal remained a good option, because energy prices would rise in the long term, and energy-efficient properties would also be worth more than those that were not.
Energy executives expect that as consumers get used to locking themselves into 20-year fixed payments under the Green Deal, they will become more comfortable with agreeing to sign up to long-term fixed packages for the electricity and gas they consume.
The roll-out of smart meters will also make it easier for companies to offer many more packages, rather than one standard variable payment, based on wholesale energy prices, as is the case now.
Ian Marchant, the chief executive of Scottish and Southern Energy, one of Britain's 'Big Six' energy suppliers, said that for example customers could decide to hedge themselves against higher prices by fixing 80 per cent of their energy bill, including the Green Deal element. The remainder would be left 'floating' so that households could save money by reducing their consumption.
He added: 'At the moment we do not offer people a choice. The package of service, product and pricing is pretty similar. But in the future people will make a lot of choices. Consumers do not properly engage on energy, because we do not allow them to. That is not good for society and should change.'
It is possible at the moment to secure a fixed fuel tariff, but such offers vary in popularity. British Gas has about a tenth of its 15 million customers on a two-year fixed deal. The company is expected to offer pilot Green Deals next year.
This article is reproduced courtesy of the Guardian Environment Network
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