A Third of Disengaged Energy Customers Prompted to Switch in Ofgem’s Collective Switching Trial

Nearly a third (30%) of the disengaged energy customers who participated in Ofgem’s new collective switching trial adopted a new tariff and saved on their bills.

90,000 inactive energy customers, all of whom had been on a default standard variable tariff with their supplier for three years or more, were sent letters inviting them to move to an exclusive 12-month fixed collective tariff negotiated by a price comparison site.

Ofgem worked with the price comparison site to select a supplier with a good customer service rating. And unlike with other collective switching processes, customers did not to need to provide complicated information about their current tariff to see personalised savings calculations, Ofgem said.

30% of these customers were prompted to move to the tariff, saving an average of £263 a year on their energy bills.

The switching rate among those who participated in the trial was seven times higher than the 4.5% switching rate for customers in the control group, who received no information.

The switching rate for trial participants on the Priority Services Register, who are often in vulnerable situations and less likely to switch, was almost as high as that among other participants.

71% of customers who switched did so over the phone, indicating that customers without internet access, who are also less likely to switch, would benefit from wide-scale collective switching.

This simplified collective switching trial was the latest in a series of experiments conducted by the energy regulator to find the best way to encourage disengaged energy customers to switch tariff. In total 1.1 million customers have participated in engagement trials and 94,000 have switched to a better deal, many of them for the first time, saving a collective £21.3 million.

Collective switching trials were recommended by the Competitions and Markets Authority, in its review of ‘loyalty penalties’ in the energy and other markets. Collective switching, along with targeted price caps, could save energy customers £1 billion a year on their bills, the CMA estimated.

Last year, Ofgem found that more than half (54%) of energy customers are stranded on expensive default or standard variable energy because they haven’t switched to a new fixed rate tariff.

The government introduced the energy price cap to limit the amount energy companies are charging these loyal, inactive customers but Ofgem and consumer groups have all cautioned consumers not to rely on the price cap and that they can find better deals by surveying the market and switching to a new tariff.

Mary Starks, Ofgem Executive Director for Consumers & Markets, said: “Ofgem’s latest simplified collective switch, and the wider programme of engagement trials we have been running, show the potential to get the energy market to work better for disengaged customers, including the vulnerable.

“The results will inform our plans to ensure that customers still get a fair deal and that more enjoy the benefits of competition after the price cap is lifted.

“In the meantime, customers who do not switch will always pay a fair price for their energy under the price cap.”