Collective energy switching initiatives place capability back in the hands of gas and electricity customers, helping them save money.
High electricity and gas prices, which lead to very large profits for energy firms have frustrated UK customers for far too long. As a consumer, you understand that the price of things will increase with inflation, but it’s difficult to understand when your energy bills see large increases and your supplier announces record profits.
Everyone is dependent on gas and electricity, but often there isn’t much that can be done, other than to simply pay the always rising and eye-watering bills.
There are ways that can help you save money, the most obvious being comparing and switching energy with Utility Saving Expert. The large choice of smaller energy firms, in addition to the ‘big six’ suppliers, help to keep the market competitive and reduce prices for everyone.
In recent years, there has been a number of ways that consumers and larger organisations such as the Government have kept the pressure on energy firms. One of the most recent innovative options; collective energy switching, dates back to Government backing in 2012. For some groups and communities, collective energy switching has revolutionised the idea of switching energy suppliers.
Rather than an individual having to search for the best deal on their own, energy providers now have to compete for you and your fellow consumers’ business. This collective bargaining power from a large number of customers has meant that everyone within the group/community can benefit from lower gas and electricity prices by securing cheaper deals.
- Collective energy switching could provide access to more attractive rates compared to those you would receive if you compare prices individually.
- Great deals may be available because energy suppliers will use collective switching to target specific groups of consumers and find a way around tariff caps.
- Collective switches are often only available for a limited time period of time.
- You must to be part of a ‘community’ or ‘group’ to take advantage from the winning tariff.
- The larger the group/community, the greater the chance you’ll be able to secure a market-leading deal.
What is collective switching?
Essentially, collective switching is when a large number of people, referred to as a closed group or community, apply their collective purchasing power to negotiate their own tariff with energy providers.
This allows the group/community to potentially secure a more attractive energy deal compared with those advertised to the mainstream market. Generally, a collective switch takes place in the following stages:
- Customers join or become part of a closed group or community.
- An exclusive tariff is negotiated with energy suppliers, and subsequently announced to members of the closed group or community.
- Switching window opens – members can switch to the winning tariff during this period.
- Switching window closes – members can no longer switch to the exclusive winning tariff.
How do I find a community?
Anyone can become a founder of a collective energy switching community. For example, groups can be led by a local council, news publications, a price comparison site, or even a combination of the above.
Sometimes, it could even be as straightforward as being a customer of a company or organisation. It’s useful to check for any direct marketing you may receive which mentions collective switching, this could be from emails or other advertising methods.
It’s important to remember that these exclusive offers are only available for a limited time period, so you’ll need to act quickly to take advantage of any great deals.
The number of people within any group/community will dictate the negotiating power. The larger the group, the greater the chance of receiving the best market leading deals.
In February 2015, the Department of Energy and Climate Change (DECC) stated that more than 13.5 million UK households were missing out on £2.7billion of energy savings by not switching providers. Consumers could potentially be saving hundreds of pounds each year by comparing and switching suppliers.
Do I have to switch if I’m a community member?
No, it’s completely your own choice if you wish to take advantage of any offers that become available to the community that you’re a part of. There is no requirement for you to switch.
Being part of these communities can only benefit you, as it grants you access to offers that aren’t generally available to the wider market.
As a group member, you will be able to view the collective energy switch offer, and compare it to current tariffs available on the market for individuals. You can then freely choose to either take the collective switch option, switch to another tariff/supplier on the market, or continue with your existing deal.
How do collective deals offer tariffs I can’t find elsewhere?
The main reasons stem from collective bargaining and purchasing power. Greater deals can be negotiated because energy suppliers will compete to win the business of any given group or community. Niche sectors can be targeted through the nature of each collective community switch.
Energy firms could potentially target a specific demographic, user group, or alternatively may just look to meet customer demand within a segment. Providers could effectively offer highly attractive deals that competing suppliers may not be able to match or wish to offer in the first place.
For example, regional energy prices can differ significantly depending on which part of the UK you reside in. A specific supplier may wish to increase market share in a specific part of the country from a rival, and because of this, the provider will offer an attractive tariff for customers within that region.
The leader of the collective switch group may offer its community a variety of ‘winning’ tariffs, which for example could include regional winners and/or winning prepaid meter tariffs.
Suppliers could use collective switching to get around legislation
One of the other benefits to collective energy switching is that energy providers can use this option to circumvent rules which limit the number of tariffs they’re able to offer.
Did you know that an energy firm doesn’t have to notify its whole customer base when offering a tariff to a closed group or community?
The industry regulator, Ofgem previously implemented legislation that required energy suppliers to have no more than four main tariffs, however, this has now been abandoned.
The majority of larger firms make huge profits from customers who don’t tend to switch and have been with the same company for years. These customers can typically be found to be on the company’s most expensive standard variable tariff.
Suppliers that offer a tariff to a closed group/community do not have to notify their whole customer base. Because of this, smaller competitors who were used to regularly winning community business will find it more challenging. This is because almost any energy company could be chosen upon offering the best collective switch deal, which has led the ‘big six’ to be more competitive in this space.
What happens when the collective switch ends?
Once the collective switch period ends, you will no longer be able to access the negotiated rates, if you didn’t opt for one of the tariffs. It’s useful to check the dates and compare against tariffs available to the wider market before you make your decision.
Good community leaders will likely already be negotiating the next community switch, this could be planned to take place in the coming months. So you shouldn’t have to wait long if you previously missed out on the last collective offer.
If you have previously registered, you’re likely to be informed through the group/community’s marketing channels. If you haven’t yet joined a group/community, join one as soon as possible to see how much you could save through collective energy switching.