British Gas considers free electricity in the UK

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1 August 2013, Gas, Electricity

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Centrica's US subsidiary Direct Energy has been offering "Free Power Saturdays" in Texas and several northeast US markets for several years. It relies on customers having a smart meter installed, and includes 24 hours of free power, albeit with a slightly higher per unit rate for the rest of the week. Non-energy costs (such as network costs) must also be paid.

The key benefit of smart meters, aside from the automation of meter readings, is the potential to entice customers to change their behavior. A key objective is to shift heavy demand loads away from times of peak demand, and to use less energy overall. One way of encouraging this behavior is to introduce a significant price penalty at times of high power demand and high wholesale prices.

The opposite approach, of steeply discounting power in off-peak periods, has not been tried as often. The natural concern is that it would encourage excessive power use. However, Laidlaw explained that Direct Energy's "Free Power Saturdays" didn't lead to any significant overall increase in power use, and importantly it was successful in achieving a degree of consumption shifting by customers away from peak periods. This arose mainly from customers rethinking when they used appliances such as washing machines and electric clothes dryers.

With 1 million smart-metered residential customers, British Gas has a clear lead in terms of UK rollout (E.ON is in a distant second place with less than 100,000 smart meters installed), so if it does introduce a free or heavily discounted weekend tariff it will be difficult for other retailers to run a spoiler campaign. The idea has definitely caught the imagination of the press, and British Gas will be watching the reaction from customers with interest. / / @DatamonitorEN

Source: MarketLine

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