Vote due on innovative energy scheme which could reduce bills for up to 2m households

The Peterborough Collective Energy Scheme will enable people from across the city, and from other participating authorities, to join together as a single unit in order to negotiate cheaper energy tariffs. Officials estimate that by signing up, households could save between £20 and £200 a year on their energy bills.

The initiative could be one of the first to follow collective energy purchasing guidance launched by the Government earlier this year. Energy Secretary Ed Davey wrote to energy suppliers (2-page / 34KB PDF) in March, making it clear that he wanted to see them engaging positively on this type of scheme.

"This is a landmark scheme which demonstrates the innovative approach being taken to help lessen the burden of high energy costs on consumers and businesses," said Peter Feehan of Pinsent Masons, the law firm behind Out-Law.com. "This type of structure is often used in procurement by blue chip companies and there is no reason why it should not work for members of the public."

If approved by councillors, the Peterborough initiative will be the UK's first collaborative scheme for collective energy switching. Fifteen local authorities will join the city council as part of the scheme. It will also be the first to allow small and medium enterprises (SMEs) to take part, as well as householders who use pre-payment meters.

Participants will be invited to register their details online or with the council free of charge, giving their current energy usage figures for gas and electricity. A 'reverse auction' at which energy suppliers will be invited to bid the lowest price to supply the energy to all those signed up for the scheme, will then take place. Participants will then be sent an offer to switch provider and accept their new energy rates.

Registration for the scheme is expected to begin later this month, with the results of the reverse auction made available before Christmas. SMEs will be able to register in January 2013. According to the Council's website, it plans to re-open the scheme to new applicants every three months.

"As a local authority we have a key role to play in protecting and helping the most vulnerable," said council leader Councillor Marco Cereste. "This scheme will give us a unique opportunity to tackle fuel poverty and to put pressure on the energy suppliers. This will also be the first scheme in the UK for businesses. By making it possible for them to participate, we are helping to make the business community much more resilient and as such contribute to sustaining growth in the city."

In a message of support, the Energy Secretary wished Peterborough City Council "every success" with the initiative and called on other authorities to follow its example.

"As a long-term advocate of collective purchasing and switching, I thoroughly welcome this initiative from Peterborough City Council and wish it every success," he said. "Enabling local residents – especially vulnerable households – to club together in this way could make all the difference in helping households get a better energy deal. I want to see many more schemes like this get off the ground."