Ofgem backs automatic move to cheap energy deals

CUSTOMERS paying too much for gas and electricity will be automatically moved on to cheaper deals under new Ofgem plans for “group switching”.

Under the arrangement, thousands of customers on rip-off tariffs will be offered cheaper deals which will save them an average of £300 a year.

Eventually it could lead to the 10 million households currently on expensive “default” tariffs being offered a cheaper deal without having to shop around using comparison sites.

A trial organised by the regulator saw 50,000 people on the default tariffs offered cheaper deals, with one in five agreeing to switch providers.

It said the switch, in which customers were moved from Scottish Power to E.ON between February and April was the most successful it had completed to date. As a result it is planning a larger collective switching trial involving over 200,000 customers later this autumn. If this proves successful it is understood that Ofgem could introduce a permanent group switching programme to help people on poor value deals save money.

The customers received letters showing how much they could save by moving to an E.ON collective switch tariff negotiated by the price comparison service Energyhelpline.

Unlike other collective switches, customers did not have to provide complicated information about their existing tariff to see a personalised savings calculation, making it easier for them to start the process.

Overall, 22.4 per cent of customers in the trial switched to achieve an average saving of around £300, Ofgem said.

Of these, approximately half chose the collective switch tariff and just under a quarter moved to other cheaper deals through Energyhelpline, while the remainder chose another tariff without using the price comparison service. Almost a quarter of customers who switched either to the collective switch tariff or to other deals listed by Energyhelpline were over 75 years old.

The 22.4 per cent overall switching rate in the trial compared to a 2.6 per cent switching rate in a trial control group of similarly disengaged customers who did not receive any information about the collective switch offer.

Rob Salter-church, Ofgem’s interim executive director for consumers and markets, said: “Many customers on poor value default deals rarely switch because they think it’s too much hassle, or might not realise how much they can save.

“The results of this trial demonstrate that 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.

“It’s particularly welcome to see many of those who typically are less likely to switch, such as older people.”