A review of a collective switching program in Britain – in which groups of households have clubbed together to switch energy supplier – has demonstrated that substantial savings on energy bills are possible.
In the program, which ran from December 2012 to March 2013, 27 collective switching schemes involving over 21,000 households saved a total of £2.7 million, or an average £131 per household – with a range from the lowest at £105 per household up to £200 per household.
Collective switching is a new development in the British retail energy market, following the commitment to its introduction by Energy Secretary Edward Davey in May 2012. In December 2012 an allocation of £5 million was made to set up and test a variety of collective switching approaches, with a particular focus on vulnerable households, and awards were made to 31 projects, covering over 94 local councils and eight third sector organizations.
The report, Helping Customers Switch: Collective Switching and Beyond, reviews these trials, which reached in total over 190,000 people. Among the findings, the switch rate was approximately 11%, with about a third of the households that switched never having switched before, and a quarter were elderly. Further, almost two-thirds were households wishing to pay for their energy by direct debit.
Key lessons learned include:
- Trust: Organizations that are generally trusted, such as local authorities, charities and community organizations, prompted people to sign up who haven’t switched before. Consumers also liked the support that was offered to them to take the hassle out of switching.
- Methods of engagement: Advertising through a variety of types particularly through newspapers, newsletters and social media, was found to be effective in getting large numbers of sign-ups across an area. For local authorities, inserting leaflets in the council tax bill was felt to be effective.
- Expectations of savings: The level of savings at which customers are willing to switch varies between customers. In addition, the level of potential savings they can make depends on several factors, e.g. level of consumption, type of existing tariff, and payment type.
- Conversion of registrations to switches: One approach that appeared to result in a higher conversion from registrations to switches was to contact people by telephone after they had received their offer to review it further.
- Energy supplier engagement: The scale of collective switching schemes appears to have an impact on which size of suppliers participate. With a significant number of registrations, it can be challenging for smaller suppliers to bid as it is difficult for them to take on a large number of customers in one go. On the other hand, the cost of creating a special tariff for a scheme can be significant, so large suppliers may only offer these if they expect to gain a significant number of customers.
The government says in the report that these initial results are promising and show that consumers can save money through these schemes, but it must now look and how to replicate their success and get more people to take part.
They should also be of interest to other parties considering collective switching schemes, which offer an additional dimension to traditional (individual) switching.
By Jonathan Spencer Jones