Octopus Energy has launched what it calls the UK’s first ‘transparent’ tariff which provides customers with a daily update of wholesale gas and electricity prices, adjusting the price they pay accordingly.
Using the Octopus Tracker app, customers can see the wholesale price they are paying for energy that day, along with the additional costs of supplying that energy such as government environmental policy, transmission and distribution network costs and VAT.
The breakdown also includes the mark-up added by Octopus Energy which according to a demo on the company’s website remains at 0.29p on the unit price and 7p on the standing charge.
Greg Jackson, founder and chief executive of Octopus Energy, said: “With this tariff, we’re tying our own hands. Even if we wanted to use sneaky pricing, we can’t. We hope that this is the beginning of an energy market where people can really see what they’re paying, and vote with their feet if they don’t like it.”
“At Octopus, we are putting trust and transparency at the forefront.”
Where standard variable tariffs often charge above the wholesale market price throughout the year, the Tracker tariff will follow the curves and daily changes, with only some days seeing a higher charge when wholesale prices spike. In these instances, Octopus will provide detail to customers around how this occurred, and are confident these will be a rarity throughout the year.
The app can alert them if prices increase and customers are free to switch to Octopus’s standard or fixed tariffs at any time or to another supplier with no exit fees if potential concerns over price volatility become too high.
However, Octopus Energy says customers are guaranteed to see wholesale market drops just as quickly as market increases, with trackers in the long run often cheaper than hedged and insured prices.
This strategy reflects the interest among businesses in tracker power purchase agreements, such as Briar Chemicals which recently signed a 25 year PPA with RenEnergy to take energy from a 1.9MW solar farm.
The energy will be purchased at a 10% discount from grid rates of energy under a ‘tracker’ structure, meaning prices are guaranteed to remain cheaper than what can be bought from the grid,
Octopus hopes to supply half of its energy for all tariffs from renewable sources, using its standing as the largest owner of solar assets in the UK. Currently the offer is only open to households, with an Octopus spokesperson saying there are currently no plans to open it up to businesses.