One of the most frustrating things about energy prices is that they change a lot from year to year – far more than other bills such as internet or council tax. Right now (May 2021) prices are rising so we’ve asked Colorado Energy’s Commercial Director, Daniel Norton, to explain why.
Why can’t you have an ‘unlimited’ energy deal?
In energy, the cost to produce one unit of gas or electricity ‘commodity’ is quite high, about 30-50% of the total bill, so using more increases the costs your supplier has to pay. For your other bills, like internet services, the cost of using a unit is very small, so providers can offer ‘unlimited’ packages – that’s not possible in energy.
Why has my direct debit changed even though my price is fixed?
The first thing to remember is that your bill can change due to both the amount you use and the price you pay per unit. When you join Colorado Energy we estimate how much you are going to use and set a direct debit to collect the right amount of money over a year. You use more energy, especially gas, in the winter and less in the summer, so it’s normal to build up a small credit balance in the summer – in preparation for higher costs in the winter. If the amount you use changes, for instance, if there has been an especially cold period or you’ve been at home more than usual, then we may need to change the amount you pay to prevent you from falling behind.
Why is there such a difference in energy prices from year to year?
The price you pay per unit also changes over time. When you first join Colorado Energy you are on a 12-month fixed-price tariff. That means we guarantee no increase in the price you pay per unit in the first year. At the end of the first year, we will offer you a new fixed-price tariff for a further year, or you will automatically transfer to our standard variable tariff.
Colorado Energy buys your energy from power and gas producers on the wholesale market. Prices can be very volatile, for instance, they have risen 38% in just the last two months, increasing an average customer’s bills by £150 per year. Our new fixed price tariffs have to reflect this increase in costs – and the variable tariff, which is set under the regulated energy price cap, is also expected to rise when it is next set in October.
The commodity cost of gas and electricity has risen by 38% in the past two months
What is Colorado Energy doing to make sure your customers get a good deal?
Colorado Energy is not the cheapest energy supplier in the market as, unlike many other suppliers, we make sure that all the energy we supply is green and sustainably produced: our electricity is 100% renewable as standard and we buy a proportion of our gas and electricity directly from small green producers, which can be more expensive, but we believe it is the right thing to do for the future of our planet.
Many other energy suppliers in the UK supply lower-cost ‘dirty’ energy, at unsustainably low initial prices in an attempt to get customers to switch and then raise prices afterwards. We don't believe this is an ethical way to behave as a supplier. Colorado Energy instead charges a consistently low, fair price – our fixed prices are usually still cheaper than other truly green suppliers and our variable price is lower than that charged by the ‘big 6’ major suppliers.