A collective switching scheme run by energy regulator Ofgem has been hailed a success as participants saved a minimum of £261 per year.
Collective switching involves an organisation petitioning energy companies to offer a unique, cheaper tariff to a large number of customers all at once. These organisations can be comparison websites, local councils or newspapers and they use the large number of potential customers they have on board to leverage the energy company to offer a favourable deal.
This latest scheme was aimed at customers who did not regularly switch energy providers, namely those who had been on the same variable tariff for six years or more and were customers of one of the “big six” suppliers. 50,000 people who fit the criteria received letters highlighting how they could save money by swapping providers.
Out of those contacted 22% took the energy regulator up on their offer, compared to a control group who did not receive information about the deal that only had a switching rate of 2.6% during the time the scheme was running. One of the reasons that Ofgem found that this particular trial to be a success was that it did not require people to enter details of their current energy tariff, which it is believed puts people off swapping provider.
“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 success of this trial suggests that some simple tweaking to the switching process could help prevent those in certain demographic groups (namely the elderly, and less tech savvy lower incomes households) from overpaying for energy due to a reluctance to swap providers. The UK’s competition authority found that energy customers were overspending a collective £1.4bn due to either not being able or not wanting to switch. Over one quarter of those who decided to switch were over 75 and 71% wanted to do the transition over the phone, which further supports the belief there are generational factors in people switching supplier. Ofgem has said that following on from the first trial they will be launching a second larger campaign come Autumn with this one reaching out to 200,000 people.
The success of the scheme was welcomed by Energy minister Claire Perry who 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.”
It would appear interest in switching providers is starting to pick up. 2017 saw 18% of customers switch electricity provider and 19% switch gas supplier. More recently, start-up Look After My Bills secured £120,000 of funding on TV programme Dragon’s Den for only 3% of their business in a deal that has been described as the best equity deal in the show’s history. The company essentially emulates the Ofgem scheme and automatically switches customers at the end of their contract to the best value tariff.