Longer contracts could reduce energy bills, says government

Consumers could benefit from lower bills and help to combat climate change by being able to sign up to longer contracts with energy companies through a new pilot project announced today by government ministers.

Up to one million households could benefit under the scheme which will allow them to choose a longer contract, and in return receive energy efficient products and services from their supplier - such as house insulation, energy efficient boilers and domestic appliances, or low-energy light bulbs. Under existing rules, consumers can switch energy suppliers after 28 days.

The pilot scheme has been developed by the Energy Services Working group (ESWG), set up following Energy White Paper proposals, with representatives from government, the regulator Ofgem, consumer body Energywatch and industry.

Trade and Industry Secretary Patricia Hewitt said: "Just as consumers choose to sign up for longer contracts when they buy mobile phones and receive free kit and extra services, we want to see if there is a market for longer contracts in return for lower electricity and gas bills achieved through energy efficiency."

Environment Secretary Margaret Beckett said that almost one third of all the energy used in the UK was consumed at home, and so "significant savings" could be made through increased household energy efficiency.

Suppliers have said the '28 day rule' rule has stopped them offering energy efficient products because of uncertainties over whether their relationships with consumers will last long enough to recover costs. Domestic consumers have also been historically reluctant to invest in energy efficiency.

Ofgem has agreed to consult on a two year relaxation of the '28-day rule' to allow energy suppliers to carry out large-scale pilot projects, to sign up to 4% or 50,000 of their customers on energy service contracts lasting longer than 28 days.This could lead to up to one million households benefiting from energy services in the pilot phase. The impact of the pilots will be reviewed after the first year and a wider evaluation later.

(gmcg)