Thousands of disengaged energy customers saved an average of about £300/year in regulator Ofgem’s first collective switch trial.
The test involved around 50,000 Scottish Power customers who had been on a standard tariff for three years or more. In total, 22% approximately 11,000 households decided to switch, saving a combined £3.3 million.
Around half of those who switched chose the collective tariff, provided by E.on and offered through price comparison site Energyhelpline saving an average of £261/yr.
The best savings were for those who switched to a tariff available to the whole market. According to Ofgem, about a quarter of the 11,000 who switched used Energyhelpline to find an open-market deal, saving an average £352/yr. Everyone else who switched during the trial did so without using the comparison site.
The energy regulator is looking at new ways of shifting some of the 11 million households still on poor-value standard tariffs onto cheaper deals. But despite Ofgem’s efforts, nearly 80% of customers contacted for the trial failed to take any action, and are still likely to be overpaying significantly while on their provider’s standard tariff.
To see if you can save by switching, do a full market comparison using our free Cheap Energy Club.
How did Ofgem’s collective switch work?
A collective switch is where an intermediary, such as a council or a price comparison site, gets firms to bid to provide special tariffs.
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Ofgem appointed Energyhelpline to run its collective switch trial including negotiating the tariff and providing the comparison and switching service for the trial.
However, unlike other switches, customers in the trial did not need to provide their existing tariff details to get their personalised savings from switching calculated. This information instead came directly from Scottish Power, which was required to hand over the data securely to Energyhelpline.
All 50,000 customers in the trial were sent a letter by Scottish Power to inform them, explaining they could opt out if they didn’t want their data shared. Those who didn’t opt out were sent more letters detailing how much they could save by switching to the collective tariff, and were given the option to switch online or by phone.
Ofgem says its main findings from the trial were:
- Of the 50,000 involved, 22.4% switched their energy.
- Almost a quarter of those to switch via Energyhelpline were aged 75 or over.
- Phone switching was more popular than online switching 71% of switches through Energyhelpline were done over the phone.
- Customers saved £300/yr on average, with total savings estimated at £3.3 million.
‘A simplified collective switch… can be a big help’
Rob Salter-Church, Ofgem’s interim executive director for consumers and markets, said: “Many customers on poor-value default deals rarely switch because they think it’s too much hassle, or might not realise how much they can save.
“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.
“It’s particularly welcome to see many of those who typically are less likely to switch, such as older people, taking advantage of the savings available during the trial.
“Ofgem will work with suppliers on a larger collective switch trial as the evidence so far suggests that it could help many disengaged customers get a better deal. We will also protect those who don’t switch from being overcharged by putting in place a price cap.”
Following the results of its collective switch trial, Ofgem has confirmed it will launch two larger-scale collective switches later this year, involving more than 200,000 customers from three large energy suppliers.