Simplifying energy switch process boosts savings, study finds

The number of households switching energy supplier can be dramatically boosted by removing the requirement for users to provide details of their energy tariff and consumption, a pilot project has found.

A trial of 50,000 people showed that simplifying the switching process led to more than one in five people moving to a better deal, eight times as many as normal. They saved an average of £298 a year, or £3.3m collectively.

The success suggests minor reforms could tackle the energy market’s problem of poorer, older and less educated people paying over the odds for default tariffs, reducing the need for a major intervention such as the government’s price cap.

The energy regulator Ofgem worked with the comparison site Energyhelplineto pick 50,000 customers who had been on the default tariff of an unnamed big-six supplier for three years. The company was ScottishPower, the Guardian understands.

Rather than those consumers having to provide their existing tariff and energy usage in order to switch, as they usually do, the information was supplied automatically. That allowed the comparison site to send letters offering a personalised saving.

Between February and April, 22.4% of those in the trial switched as a result of the approach, compared to 2.6% for a control group of 5,000 who did not receive letters. Around half moved to an E.ON tariff negotiated by Energyhelpline. The rest chose other deals.

More than a quarter were over 75 and 71% chose to switch over the phone, suggesting a digital and age divide also holds back switching.

Far more people were encouraged to switch among the half who received letters with their existing supplier’s branding (26.9%) than the other half which had Ofgem branding (15%).

Ofgem hailed the trial as its most successful to date. “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,” said Rob Salter-Church, interim executive director for consumers and markets.

The positive results have sparked plans for a bigger trial of 200,000 in the autumn, expected to involve either British Gas or SSE.

The energy regulator said, however, that it was too early to say if having energy tariff and consumption information pre-supplied would become the default way to switch in future.

In total, 3.27 million people switched in the first seven months of 2018, up 8% on the same period last year. There are fears, however, that switching could stall with the price cap lulling people into a false sense of protection and reducing switching savings.

A startup that promises to automatically switch energy supplier on households’ behalf won the backing of investors on Dragon’s Den on Sunday. Two of the dragons took a 3% stake in Look After My Bills for £120,000.

The company effectively recreates the Ofgem test, allowing customers to be automatically switched into the best offers on the market.


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