Ofgem will release a full document in March. After a final consultation round Ofgem expects suppliers to voluntarily agree to the changes kicking in late in 2013 – or face binding new legislation.
Here are some of the key reforms suggested by the document:
Suppliers will not be forced to transfer customers en masse to other suppliers.
Suppliers will have to eliminate preserved (termed ‘dead’ in the release) tariffs that bring ‘no value’ and transfer these customers onto their cheapest variable rate.
All tariffs must have a standing charge and a unit rate. If so, then this may impact some smaller supplier whose tariffs are made up of just a unit rate. It is not crystal clear whether suppliers would be allowed to create tariffs with a Standing Charge and two unit rates.
Suppliers have to tell their customers on the bill what their cheapest tariff is.
Discounts appear to no longer form part of a tariff. Customers will be able to mix and match tariffs with discounts but the documents offers no details on this.
And this is not yet clear:
Do suppliers have to offer the same tariff choice for all payment methods, incl. for prepayment meters? This is not explicitly stated in the document, but is potentially important as it may have big implications on tariff choice for traditionally more expensive payment methods, such as prepayment, where suppliers have generally not been eager to compete. The same question applies for fuel types – do suppliers have to make all their tariffs available as dual fuel, gas and electricity tariffs?
Tariff proliferation may not really end if customers are asked to mix and match discounts with tariffs and have the choice of all fuel types. The number of tariffs and tariff variations could potentially explode further. It is not yet clear how this will work.
Our preliminary conclusion is:
Customers will still have to compare supplier tariff deals against each other – nothing in the document suggests that energy suppliers will have to do this job for them.
We see no incentive for suppliers to offer cheap variable rates.
The market will shift in a big way to fixed rate deals.
Collective switching (the trendier byword for energy auctions) arrived last summer and is set to grow.
What is it and how does it work?
Collective Switching schemes are typically organised at the local level. Local councils (with funds from central government) have taken the lead in promoting these schemes.
A typical scheme works like this:
1. Signing up to a collective switching scheme should be free and without obligation. If you’re charged to sign up then you are probably dealing with a scam. Avoid!
2. You need to know who supplies your energy, what tariff you are on and how much energy you use in order to register.
3. You need to sign up to the scheme before the stated closing date.
4. The auction will run after the closing date. What this means is that the organisation in charge of the scheme is canvassing the energy suppliers for bids and calculating the best one for you.
5. About a week after the closing date you should expect to hear back with a quote offer – i.e. the best deal for you. Then you either commit to switch or you don’t.
Why are collective switching schemes a good thing?
Collective switching schemes seem to reach people that do not use comparison websites to switch to the best deal. That is a good thing because switching is the lifeblood of a competitive energy market. The more people switch the more competitive the market becomes and that is good for all of us (well, perhaps not the suppliers).
Are collective switching schemes better than switching through a comparison website?
Online comparison and collective switching address different markets. If you are comfortable switching online through this website, then by all means (please) do. You are here anyway, right?
Collective switching is currently successful because it brings consumer choice to people who may not be active in the energy market.
And before you ask: besides running this website we also have a big hand in providing switching schemes with tariff data and software services. So we can afford to be neutral in this debate!
What collective energy schemes are currently open for sign-up?
As of today we know of these schemes. By the way, you don’t need to live in these places to sign up!
“Ready to Switch” campaign for Blackpool Council, Cheshire West and Chester Council, Hertfordshire County Council, Hull City Council, London Borough of Havering Council, Luton Borough Council, Northumberland County Council, South Holland District Council, Suffolk Coastal District Council, Waveney District Council, Wiltshire Council and Great Yarmouth Borough Council with Peterborough City Council as lead Council, Started in November 2012 and closed last week
“Great Manchester Fair Energy” campaign for Bolton Council, Bury Council, Manchester City Council, Rochdale Metropolitan Borough Council, Salford City Council, Stockport Metropolitan Borough Council, Tameside Metropolitan Borough, Trafford Council, Wigan Council, Calderdale Council, Gloucestershire County Council and St. Helens Council with Oldham Council as lead Council. Started in December and closed last week.
Up and coming schemes
Check back for information about new schemes coming soon.