Ofgem Scraps Database of Disengaged Energy Customers, Will Tackle Loyalty Penalty Other Ways

The energy regulator has abandoned the development of a central database of disengaged energy customers, preferring to tackle inertia in the market in other ways.

The Competitions and Markets Authority (CMA) recommended Ofgem develop the database in 2016, following a two-year investigation into the retail energy market and low levels of consumer engagement.

Research found that around half of all energy customers are on expensive standard variable tariffs, although they could save more than £300 a year by switching tariff or supplier. The database, alongside a slate of trials, was to help Ofgem encourage consumer engagement and prompt people to switch.

The database contained information about all customers who had been on a poor value default tariff with their supplier for three or more years, including details of their current energy tariffs and annual energy use, which could be used to calculate cheap tariff offers.

However, Ofgem has now abandoned work on the database, saying there may be more effective ways for the information about disengaged energy consumers to be shared.

Additionally, the implementation of the energy price cap on default and standard variable tariffs at the start of the year has delivered some level of protection to these inactive customers.

The price cap has removed around £1 billion of detriment to loyal energy customers.

“We consider our focus should be on determining how best to ensure that the retail energy market works more effectively when the current price cap is lifted – as it must be no later than 2023,” Anna Rossington, Deputy Director, Consumers and Markets at Ofgem said in a letter.

Additionally, the trials Ofgem has run to promote consumer engagement have been successful in encouraging consumers to switch and save. 10 trials, including those linked to the database of disengaged customers such as Check Your Energy Deal and the opt-in Collective Switch, have reached 1.1 million customers.

Of the participants, 94,000 were prompted to switch energy supplier, many for the first time in years. In total these customers have saved around £21.3 million on their energy bills.

In Ofgem’s recently concluded Collective Switching trial, nearly a third (30%) of the 90,000 participants were encouraged to adopt a new, collectively negotiated energy tariff. Consumers, who had all been with their supplier for three or more years, received a letter encouraging them to switch to an exclusive fixed-rate tariff and didn’t require they input information about their energy use or current tariff, a process which can daunt some disengaged energy consumers.

71% of those who switched through the Collective Switching trial did so over the phone, suggesting collective switching could reach older customers without internet access, who are among the least likely to switch. Switching rates among those on the Priority Services Register, who are often in vulnerable situations, were also high.

Those who switched through the trial saved an average of £263 on their energy bills.

Lauren Smith
Written by Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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