Airtricity's Great Land Grab
posted by Simon Moynihan Oct 01, 2010 at 01:00 in Gas & Electricity
Airtricity is on a land grab! Or should we say: they’ve launched a bit of a customer acquisition campaign. And they mean business. They flew Jack Charlton into Dublin to promote their new deal and launched it at the Aviva Stadium. Very flash indeed.
So what are they flogging? Well, they’ve put together a new gas and electricity deal called “The Biggest Save” and they’re headlining with 20% off Bord Gais’s gas unit rates for one year.
With winter on the way it’s quite timely, but it’s also very unusual. Airtricity is owned by SSE, a huge UK energy company, and in the UK energy suppliers typically announce gas price cuts in January and then actually reduce prices in March after the bulk of household gas has been sold. You know, to maximize profits and all that.
So why is Airtricity cutting the price of gas by so much now? Well, rumour has it that the ESB is preparing to launch their re-branded home energy company very soon and you can be sure they will be selling gas as well as electricity. Plus the new ESB will no longer be encumbered by pesky regulation that prevents it from selling gas at whatever price it wants. So this is really a pre-emptive strike - Airtricity wants to grab as many gas customers from Bord Gais as they can before the new ESB launches.
And there’s more. Airtricity wants to keep these customers out of the new ESB’s clutches until the dust settles. Customers that sign up to Airtricity’s “Biggest Save” deal will have to agree to a one year contract and sign up their electricity as well. Customers that quit Airtricity before their year is up will pay a penalty of €100. Deals like this are common in the UK, but this is the first time we’ve seen a true 1-year dual fuel energy tariff in Ireland and it’s fitting that it has been introduced by a UK company.
Also, Bord Gais has been hamstrung by the regulator in the same way that the ESB was. They can’t lower the price of gas to compete with Airtricity because the regulator won’t let them. And because Airtricity is requiring that customers sign up both gas and electricity, Bord Gais will likely hemorrhage many of those lovely customers it won from the ESB over the last year and a half.
As a strategy, I must take my hat off to Airtricity. This is really pretty smart stuff and the good folks over at the ESB must be muttering and shaking their fists.
Besides the strategy, “Biggest Save” tariff looks like a good deal too. 20% off Bord Gais’s gas unit rates is not to be sniffed at especially with winter around the corner. There’s also 6% off the ESB’s current electricity unit rates, which is ok. Of course there’s caveats galore but you’d expect that. You have to get your bills online, pay by direct debit, have your gas and electricity with Airtricity and stay with them for a year or pay a €100 penalty - also, the gas standing charge is €13.62 more expensive than is usual.
So the only thing left to do is take a look at Airtricity’s “Biggest Save” tariff and see if it’s really as good as it looks.
In their press release, Airtricity says that “Consumers with an average monthly spend of €90 each for gas and for electricity will save an enormous €234 in the coming year with Airtricity’s new ‘Biggest Save’ discount”.
So the first bit of analysis is how much gas and electricity can you buy for €90 each a month at current Bord Gais and ESB regulated rates?
Well, if you are spending €2160 a year on your gas and electricity (that seems a lot doesn’t it?), you’ll get approx 21,349 kW/h (or units) of gas and 6,098 kW/h of electricity when you take into account carbon tax, VAT, standing charges and what-not. That probably doesn’t mean much to most people, but I’ll see if I can make sense of it.
The UK energy regulator says that the average household uses 20,500 kW/h of gas and 3,300 of electricity a year. There aren’t any official figures for Ireland, but Bord Gais says that the average Irish household uses 13,800 kW/h of gas a year, and Flogas pretty much agrees with an average of 13,750 kW/h. For electricity, Bord Gais says that the average Irish household uses about 5,591 kW/h of electricity a year and Airtricity’s figure is just over 6,000 kw/h.
Looks like Airtricity is using the UK average gas figure in the absence of an official Irish one and they are using something similar to Bord Gais’s electricity figure so that’s probably close to what the average Irish household actually uses.
But anyway, lets play ball with Airtricity, take their gas and electricity consumption figures of approx 21,349 kW/h (or units) of gas and 6,098 kW/h of electricity and see what we get.
Airtricity Biggest Save eBundle
Annual Cost:
€1932.46
Bord Gais Paperless (electricity) & Flogas Standard (gas)
Annual Cost
€1936.14
Flogas Standard (gas) & Airtricity Smart Saver Online (electricity)
Annual Cost:
€1936.75
Airtricity are cheapest if you use as much gas and electricity as they say, but there’s only €3.68 in the difference between them and a Flogas/Bord Gais mix. Plus if you were with Bord Gais and Flogas or Flogas and Airtricity, you wouldn’t be tied in for a year, which would allow you to wait and see what the new ESB has to offer.
What’s really interesting about this though is if you use something more akin to the Irish gas consumption figures, you get a different picture. If we use say 13,800 kW/h of gas and 6,000 kW/h of electricity, a Bord Gais & Flogas or an Airtricity & Flogas combination is actually cheaper than Airtricity’s Biggest Save deal.
Flogas Standard (gas) & Bord Gais Paperless DD (electricity)
Annual Cost:
€1598.43
Flogas Standard (gas) & Airtricity Smart Saver Online (electricity)
Annual Cost:
€1599.03
Airtricity Biggest Save eBundle
Annual Cost:
€1624.51
So really what were seeing here is that the Airtricity deal is a good one regardless but particularly if you’re a high gas user. But if you’re a lower gas user and an average or higher electricity user, you’d be better off with Bord Gais or Airtricity for electricity and Flogas for gas.
In the UK, home energy tariffs are now more complicated than mobile phone bills. Before long we’ll see the same thing in Ireland. Without a standard by which tariffs can be compared, savings figures from suppliers will become completely meaningless.
To allow us to compare energy tariffs properly the regulator needs to publish agreed national average household energy consumption figures and suppliers should be required to use them when making savings claims. That way we could easily work out whether deals like these are worth switching for or not.
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Update 5th October 2010
I've made a couple of changes to the above blog. I made a confusing statement when I said that the annual cost for an average household with Flogas and Airtricity was €1599.03 and then went on to say a Flogas & Bord Gais combination was the cheapest option, so I've added in the Flogas Bord Gais calculation and some supporting text. As I originally stated, a Flogas and Bord Gais combination is the cheapest option for an average household by 60 cent per year based on the qualifications I've made in the blog above.
Airtricity's Biggest Save gas tariff has a standing charge that is €13.62 more expensive than Flogas standard and Bord Gais standard, I did not include this in the original calculations, so that has been changed.
It's worth noting here that Airtrcity also has a gas product that is 10% off Bord Gais's unit rates, but like the Biggest Save package, you must take your electricity with Airtricity as well. I didn't used this bundle, because this blog is about their Biggest save package.
Yesterday, Flogas announced two new gas tariffs, one of which is now the cheapest stand alone gas tariff in the marketplace. I will analyze these tariffs in an upcoming blog.
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