Energy - A Progressive Pricing Model
A progressive pricing model that offers financial incentives to promote change in energy-consuming behavior. A four tier approach where electricity prices rise in response to consumption thresholds. Every consumer starts at tier one with pricing increasing by 10p for every 1,500 kWh consumed.
Ofgem estimates the average household in England, Scotland and Wales uses 2,700 kWh of electricity annually. Under the progressive pricing model this total would be divided between 1,500 kWh in tier one, priced at 25p, and 1,200 kWh in tier two, priced at 35p.
Every consumer below the medium made a financial saving on the progressive pricing model. The greatest differences with progressive pricing were the two extremes: savings for those consuming the least electricity and higher costs for those consuming the most.
The progressive pricing model increased total annual revenue by an estimated 15%. An amount that could be used to finance sustainable energy projects, fund grants to increase energy efficiency and assist people living in energy poverty.