Why energy consumers are voting with their feet
Blog
Neil Barnes
Publication date
Industry sector
Supply and Retail Market
Switching - being able to change supplier for a better deal - is central to having a competitive retail energy market.
So the news that switching gas and electricity suppliers is at a 6-year high, with a 30 per cent increase year on year, is very welcome to me. Now is a good time to take stock of what we’re doing to improve the switching process, including where we’ve come from, and where we want to go.
It’s a good time for customers to consider voting with their feet given that some suppliers have put up their prices. The threat of customers switching away helps encourage companies to keep their costs down and improve their service in order to hold onto their business. In doing so, this drives a better deal for all consumers.
What is driving the rise in switching?
First, there is simply more incentive for consumers to switch. The number of domestic energy suppliers has mushroomed over the last 5 years, from 14 to around 50 now.
At the same time, there have been more cheaper deals available, as companies compete with each other for customers. Now, you could save around £230 by switching from an average standard variable tariff - the deal that most customers are on – to the cheapest deal on the market.
Second, there’s been a boom in technology that makes changing supplier easier. This includes the growth of price comparison websites that enable you to compare and switch online. My colleague Stephanie wrote a blog about this.
Third, we’ve introduced rules that have made switching quicker and more reliable than ever before. These measures have cut down the time it takes to switch, on average, from five weeks in 2013 to under three weeks now from when a customer signs up. The three weeks includes a 14-day ‘cooling off’ period, where customers can cancel the switch if they change their mind.
Also, since its introduction in June 2016 , 11 suppliers have signed up to the Energy Switch Guarantee, that makes sure your new provider arranges everything for you and that final bills and any refunds are timely and accurate.
And to make it easier for consumers in vulnerable situations to switch, we’ve raised the threshold that prepayment customers can be in debt and still switch, from £200 to £500.
Our aspiration, however, is for switching to become as routine and easy as ordering shopping online.
There’s still a very long way to go
When we surveyed consumers last year, around half said they couldn’t remember ever switching. These are likely to be among the two-thirds of people that are on standard variable tariffs, and typically paying more than they need to. Essentially, whilst good deals are out there for those that shop around, Great Britain’s energy market operates at ‘two speeds’, where many also lose out.
Our research reveals that there’s a widespread perception that switching is a hassle – 46 per cent of people we surveyed last year thought this. While the reality is that the process goes smoothly for the vast majority of people who switch, it’s vital we counter this perception.
It’s also clear that suppliers need to do more to reach out and help consumers get a better deal.
So, over the next year, we’re putting the onus on companies to get the message out there. We’ll be trialling making companies contact their customers to tell them about the best deals out there – not just their own but their rivals’ too.
At the same time, we’re improving switching at a nuts and bolts level. In the future we want to enable customers to switch supplier by the next day if they choose to - from clicking a button on a price comparison website, to receiving energy from a new company.
To achieve this, we’re working with industry to put in place a central registration system. This will hold centrally data on all meter points across Great Britain, so that all suppliers can easily access the information they need to make the switch go smoothly.
We’re not in that world yet. But today’s figures show we’re making a good start on getting there.