Consumers reluctant to adopt time-of-use electricity tariffs despite big cost savings

Householders prefer simple flat or day/night rate electricity tariffs, according to the Economic Social Research Institute.

Consumers reluctant to adopt time-of-use electricity tariffs despite big cost savings

Householders prefer simple flat or day/night rate electricity tariffs, according to the Economic Social Research Institute.

This is despite the fact that the newer time-of-use tariffs could save them money.

The ESRI’s Behavioural Research Unit found consumers avoided choosing deals where the price of electricity varied throughout the day.

Consumers were reluctant to choose new time-of-use tariffs, which are being introduced to encourage people to use cheaper electricity at off-peak times to help balance out demand across the grid.

The survey also noted consumers had difficulty understanding how to compare the costs of using time-of-use tariffs with their own simple flat or day/night tariffs.

This is despite the fact that they could shave an average of 13% off their electricity bills if they opted for time-of-use tariffs.

The experiment also tested whether consumers found it easier to understand the new tariffs system when they used a price comparison tool created specially for the experiment.

The study showed they made better decisions about new tariffs after they used the tool.

The study was undertaken in collaboration with the Commission for the Regulation of Utilities (CRU) and designed to inform policy as Ireland introduces smart meters.

The new meters will allow energy providers to offer time-of-use tariffs that reward households for using electricity at off-peak rather than at peak times of day.

In principle, consumers will be able save money and help the environment, provided they understand the deals and choose an appropriate tariff.

In the experiment, a representative sample of consumers were broadly in favour of smart meters.

“Shifting consumers to time-of-use tariffs will not be straightforward,” said Dr Cameron Belton, lead researcher at the ESRI.

“This experiment shows consumers fight shy of these more complex tariffs even when they can save significant amounts of money.

“Designing and promoting good online comparison tools may help.” CRU Commissioner Aoife MacEvilly said: “The introduction of smart meters is a key building block in enabling consumers to participate in the low carbon transition.

“We know from customer trials that smart services can deliver real benefits for consumers. “The results of this research help the CRU to better understand consumer attitudes and difficulties they face when assessing and choosing offers from energy suppliers.

Clearly, we have work to do to communicate the benefit of time of use tariffs, from both a cost-saving and environmental perspective, to positively influence consumer behaviour.

“For the CRU, the research points to the opportunity and necessity of developing more advanced information tools to demonstrate the value proposition of smart meters as the project continues.” The ESRI research project comes at a time when Bord Gáis Energy has emerged as the third supplier to drop its prices in a looming energy price war.

The supplier will drop its residential electricity prices by 4.5% and its gas prices by 6.5% from 1st May.

The supplier had previously decreased its gas prices by 4% and increased its electricity prices by 2.5% in October.

The price decrease will, according to comparison and switching website bonkers.ie, save the average electricity customer around €37-a-year while the average gas customer will save around €43 on their annual bill.

The move follows recent price reductions by both Electric Ireland and PrePayPower which both cut their electricity prices by 2.5% and gas prices by 11.5% in recent weeks.

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