Disengaged energy customers are eight times more likely to switch supplier if they were shown personalised calculations of the amount of money they could save, without needing to provide details of their current tariff and consumption, a trial by energy regulator Ofgem has found.
The trial involved 50,000 households that had been on the same variable tariff from one of the big six suppliers, understood to be Scottish Power, for at least three years and an average of six.
These customers received letters from energy price comparison site Energyhelpline showing them personalised calculations of how much they could save annually, eliminating the need for customers to provide details themselves about their current tariff and energy use.
22% percent of the households that received the letter switched provider, compared to just 2.6% of those in the control group which didn’t. Half who switched moved onto a collectively negotiated tariff with E.on, advertised in the letter, and saved an average of £261 a year. The other half switched to deals listed by Energyhelpline, a better tariff from their existing supplier, or a deal they found themselves, and saved an average of £298 a year, or £3.3 million collectively.
A quarter of customers who switched in the trial were over 75, and 71% arranged the switch over the phone, suggesting that age and lack of computer access and fluency are inhibiting switching.
A previous study by the UK’s Competition and Markets Authority found that customers were losing out on £1.4 billion of savings by not switching energy provider.
“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,” said Rob Salter-Church, Ofgem’s interim executive director for consumers and markets. “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.”
Following the success of the trial, Ofgem has announced plans to launch a larger switching trial with 200,000 customers this autumn.
Energy minister Clair Perry welcomed the results of this recent trial. "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,” she said.
Gillian Guy, chief executive of Citizens Advice, was also enthusiastic. “The success of this trial shows that simplifying the process can lead to better results for people who wouldn't ordinarily switch."
Rates of switching have already accelerated in recent years: 3.27 million people switched energy provider in the first half of 2018, up 8% from the same period last year. 2017 was also a banner year for switching, with 18% of consumers switching their electricity provider and 19% switching gas supplier.
However, there are concerns that the government’s energy price cap, due to be launched by December and intended to protect the 11 million customers on default tariffs from inflated prices, may lull consumers into a false sense of complacency and reduce market competition and rates of switching.
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