You may have heard about collective energy switching schemes but what are these schemes, and do they offer you the best deal?
What is Collective Energy Switching?
Collective energy switching is where a group of people join together to switch energy suppliers and they collectively negotiate an energy deal for all their participants.
There is no restriction on the number of participants but the more people in the group the better the deal might be. However, energy suppliers are more likely to compete for a larger number of customers and offer better deals than what they are currently offering to individuals.
How Much Could I Save?
Typically, these types of schemes offer savings of up to £300 or more in some cases, though these figures are averages and the savings can vary per customer.
The savings are likely to be much greater for customers who have not switched before or have not switched for several years. Frequent switchers are likely to see lower savings.
Who Runs Collective Switching Schemes?
There have been a variety of offerings in the energy market over the last few years that have included organisations such as local authorities, newspapers, and advice providers.
Often these schemes are run not by the organisation fronting the scheme but by a collective switching provider who often combines several schemes to get better deals for the participants. Two of the most well-known collective switching providers are Energyhelpline and iChoosr who are behind a lot of the local authority collective energy switch schemes.
The uptake in these schemes has largely been due to the trust that the participates have in the organisation that is fronting the switching scheme and the promotion that occurs around the scheme to recruit participants.
Different organisations will attract different energy customers which is why multiple schemes of this kind can all work as they attract a variety of people. These types of schemes can also encourage people who do not regularly switch or have never switched before to take part in the scheme.
How Does Collective Energy Switching Work?
Typically, collective energy switching follows these four steps:
- The participants must provide their details and basic energy usage information to enable the organisation behind the scheme to create a collective picture of the participants to base their calculations on. These calculations will be used to negotiate the price with prospective energy suppliers through utilising the bulk-buying power that they have.
- The energy suppliers are invited to participate in the auction and asked to bid for the customers with energy tariffs that offer a range of options including tariff length, payment type, paper/paperless billing
- The winning energy supplier’s deal is then promoted to the participants and each participant will get a personalised offer. The participants can decide individually if they want to switch to the deal they are being offered. It is advisable to compare this deal with other deals available in the market before switching
- The participate either accepts or declines the deal. Those that accept the deal will proceed to switch energy supplier
Often the winning energy supplier for these collective energy switch schemes is one of the Big 6 energy suppliers which can offer reassurances for some participants who may be hesitant to switch to an unknown supplier.
What Does Switching Energy Suppliers Involve?
If you select to switch energy suppliers through a collective energy switch or through any other route the switching process should still be the same. After all your details have been collected including payment details if paying by direct debit, the energy supplier will complete the switch for you and you will not need to contact your current energy supplier. Switching energy suppliers can take up to 21 days.
During the switching process, you should not see any difference in your energy supply and it will not be disrupted. During this period the new energy supplier will probably send you communications to keep you informed about the switching progress. You will be asked to supply meter readings a few days before the switch takes place which they will share with your current supplier so that they can generate your final bill. You will also be notified when the switch has been completed.
Will the Deal Offered Be the Best Deal Available?
The energy deal offered as part of the collective energy switch will likely be the best deal for the collective, but it may not be the best deal for every individual in the scheme. It is advisable that the deal should be compared to see if there are any better deals for your circumstances before accepting the offer.
The simplest way to compare energy suppliers is by using a price comparison site to see which energy supplier/s can offer you the best tariff.
To get the most accurate comparison you should use your actual consumption data from your current energy bills and use an annual figure where possible. If you do not have the energy usage figures you can select the level of usage you have but this will not give you an accurate reflection of your anticipated costs.
Power Compare has a price comparison tool that is powered by the Ofgem accredited uSwitch service. We also have a useful guide that can help support you through the switching process if you need help.
It is worth knowing that you may get a cheaper tariff if you are able to:
- Pay by direct debit
- Manage your account online rather than receiving paper bills, and submit your own meter readings
- Get both gas and electricity from the same supplier on a dual fuel tariff
Why Do Energy Suppliers Compete?
The collective energy switching schemes are very attractive to energy suppliers as they offer a large number of new customers with no marketing costs just a fix fee per customer who switches to them.
These costs are much lower than trying to attract new customers themselves and therefore they can offer better rates. The commission rate is also likely to be similar to that which they pay a price comparison site per customer for switching to them through their site.
There is also a risk that by not taking part they may lose many of their own existing customers if the participants are currently their customers. It also helps with positive publicity for the winner as the announcement links them with the best energy prices in the market which may result in other people switching to them.