Green Power

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The environmental lobby is always complaining that electricity suppliers are not interested in the environment. My local electricity supplier has just sent me a letter that blows that fallacious argument apart. London Electricity, a privatized electricity-distribution company, is offering its customers the opportunity to switch to a “Green Tariff.”

The concept is simple. Customers agree to pay a slightly higher tariff of 4 pence (6 cents) per unit. This equates to a modest increase of $20 per annum for an average household. Customers who switch to the Green Tariff receive two free energy-saving light bulbs, worth $13 each. These bulbs use one-fifth the electricity of ordinary bulbs and last 15 times longer. The customer should thus easily save on electricity and bulb replacement to repay the higher cost of the bulb, and more.

The company promises that the extra revenue arising from the higher tariff will be allocated to a Green Energy Fund to invest in small-scale renewable energy projects. For every penny that the customers put in, London Electricity will put in a matching penny. If a customer uses 5000 kWh of electricity a year, London Electricity promises to purchase that much electricity from renewable sources, e.g., wind farms and tidal power.

Why is London Electricity making this offer? The answer is quite simple. Following privatization and deregulation of the British electricity industry, customers can choose to purchase electricity from several suppliers. London Electricity clearly sees the Green Tariff as a source of competitive advantage. It is possible that its competitors may offer a similar deal or an even better one. If so, that is not a problem as customers can easily change suppliers.

So the next time an activist from Friends of the Earth or Greenpeace complains that energy companies put profits before the environment, I will ask them a simple question. Are you on London Electricity’s Green Tariff? Free market environmentalism works in practice. Lets hope that other companies follow London Electricity’s pioneering lead.

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