Energy switch trial brings savings
- Published
Loyal and elderly energy customers have saved at least £261 a year each in a collective switching trial run by the industry regulator Ofgem.
Some 50,000 people who had typically been on the same variable tariff for six years with one of the big six suppliers were involved in the trial.
The scheme was based on the idea of "collective" switching, where a group of consumers swap supplier in one go.
Although four in five did not switch, Ofgem said the trial was a success.
Some 22% of people who received letters explaining how they could save money by switching deals through the scheme followed through by moving to a cheaper tariff.
This compared to a 2.6% switching rate among a "control group" who received no information whatsoever.
What is collective switching?
A number of organisations, including switching sites, newspapers and even local authorities, have helped groups of several thousand people move supplier in one go. The economies of scale enable them to negotiate lower prices.
The deal is usually negotiated through an auction, with a specific deal for those in the collective switch.
Many of these groups have said the participants saved more than £350 a year each by switching collectively.
However, critics say the deals on offer are not necessarily the cheapest on the market.
Ofgem said it was easier for customers to take part in its trial than in typical collective switching deals.
That is because they did not need to enter the details of their existing tariff.
In its trial, customers were encouraged to contact price comparison site Energyhelpline to receive a personalised savings calculation.
Of those who switched, the vast majority (71%) dealt with Energyhelpline on the phone. This highlights how many people in this group of loyal, often elderly, customers might not be comfortable using the online route generally advertised as the way to switch.
Half moved onto the collectively negotiated tariff, which Ofgem said would save them £261 a year.
The other half of switchers moved onto other deals listed by Energyhelpline, a better deal from their existing supplier, or a deal they have found themselves - with an average saving overall of £298 a year.
Price cap
"The results of this trial demonstrate that offering a simplified collective switch and providing personalised savings can be a big help in giving these customers the confidence and reassurance they need to start a switch," said Rob Salter-Church, from Ofgem.
The regulator said it would start a larger switching trial involving 200,000 people in the autumn.
A study by the UK's competition authority said that consumers were collectively losing out on £1.4bn of savings as they would not, or could not, switch to better deals.
However, in 2017, 18% of consumers switched their electricity suppliers and 19% switched their gas suppliers, the highest rates for nearly a decade.
The government and Ofgem is pressing ahead with plans to cap the bills of 11 million consumers who remain on standard variable tariffs.
Energy minister Claire Perry said: "Millions have been on poor value deals for far too long and it's great to see Ofgem helping the hardest to reach households switch to better value deals."
Gillian Guy, chief executive at Citizens Advice, said: "The success of this trial shows that simplifying the process can lead to better results for people who wouldn't ordinarily switch."
- Published1 August 2017
- Published8 August 2018
