OFGEM launches ‘collective switching’ deal for 50,000 gas and electricity consumers

Partly in an attempt to forestall fierce criticism from energy MPs, OFGEM yesterday rushed out a pilot project to ‘collectively switch’ 50,000 vulnerable gas and electricity customers because of the broken British energy market.

OFGEM will launch the trial in the coming weeks of a simplified collective switch aimed at consumers on the worst deals who have not switched for more than three years.

This follows the success of a similar smaller trial run by Ofgem last year which resulted in a trebling of switching rates.

Organisers of collective switches help large groups of consumers to save money by negotiating a good deal with a supplier on their behalf.

OFGEM reforms aim to make it easier for people to switch, as well as protect those who don’t, are part of its plans to deliver a more competitive, fairer and smarter energy market for all consumers. 

Earlier this month, the UK energy market regulator extended its prepayment safeguard tariff to almost one million vulnerable households to protect them from overpaying for their energy.

Overall domestic switching rates are at a record high, which shows that more people are engaging in the market. Last year, 18% and 19% of electricity and gas customers respectively switched supplier, the highest switching rates since 2009 for electricity and 2008 for gas.

However, around 57% of households remain on poor value standard variable tariffs which are not covered by the safeguard tariff.

The most ‘sticky’ customers – ie the ones who switch suppliers the least, or never – are in Scotland, partly for legacy issues stemming from the fact that the Big Two McSuppliers (Scottish Power and Scottish & Southern Energy) are both vertically integrated electricity generators as well as retailers.

Rob Salter-Church, interim senior partner for consumers and competition, said: “OFGEM is committed to getting all consumers a better energy deal.

“We will protect consumers who don’t switch from being charged too much while we put in place the building blocks for a more competitive market.”

Meanwhile, the government is seeking views on adding a safeguard energy tariff imposed by OFGEM for vulnerable consumers on standard variable and fixed-term default tariffs to the list of fuel poverty measures for which public authorities can share data with gas and electricity suppliers for the purpose of assisting households in fuel poverty.

Part 5 of the Digital Economy Act allows data sharing between specified public authorities and energy suppliers for the purpose of alleviating fuel poverty.

The consultation closes on 26 Feb 2018.

13 Feb 2018

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