Through collective energy switches, consumers can benefit from cheaper gas and electricity deals. Here we take a look at what a collective switch is, how it works, and how it could save you money on your energy bills.
What is collective switching?
Collective switching is a way for consumers to group together and leverage their combined purchasing power to secure exclusive gas and electricity switching deals from energy suppliers. In this arena, bigger is better: The larger the collective, the bigger the savings.
Consumers can take part in collective switches by signing up to local or national collective switch schemes, organised by trusted intermediaries, such as local councils, third-sector organisations, and national newspapers, with the help of third-party expert energy service providers like Selectra.
A history of collective switches in the UK
Back in 2012, Which? and 38 Degrees were the first to pilot a collective energy switch scheme in the UK, which saw more than 36,000 consumers save a yearly average of £223.22 on energy bills. Since then, support from the former government Department of Energy and Climate Change (DECC), and the energy regulator Ofgem, has raised the profile of the practice.
Ofgem successfully trialled five collective switching schemes from 2018 to 2019, in which a total of 94,000 consumers switched suppliers and saved a combined £21.3 million.
Similar schemes have been run by The Telegraph in conjunction with Energy Helpline, as well as by a number of local councils, including Essex County Council, North Lincolnshire Council, and South Bucks District Council.
Energy suppliers have welcomed the practice since its introduction to the UK market, as the benefits of collective switching are favourable for parties on either side of the supply line. In exchange for one-off, fixed-term money-saving tariffs for consumers, suppliers gain large numbers of customers in single swoops.
How does it work?
The collective switch process is pretty simple for consumers: You sign up, you wait, you receive an offer, and you choose whether to switch or not. Behind the curtains, however, there is quite a lot going on. Here’s how it works.
Forming the collective
Collective switch scheme organisers will open a scheme to the public for a limited period. At this stage, consumers can register their interest in taking part. Doing so is free and does not commit you to switching your supply.
To register, you may need to provide some or all of the following information:
- Your name, address, and contact information.
- The name of your current energy supplier and information about your gas and electricity tariffs, including the type of tariff, the term of your contract (if applicable), and details of any exit fees.
- How much gas and electricity your household consumes in a year.
- The payment method you use for your energy bills.
The total number of consumers that sign up to the scheme will determine the collective bargaining power of the group. The more, the merrier.
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Energy suppliers bid for the group
When consumer registration closes, scheme organisers will negotiate with energy suppliers or hold a ‘reverse-auction’ for the custom of the group, in which some or all of the UK’s domestic energy suppliers bid with the best tariff deals they can muster. The supplier that offers the best deal in the reverse-auction wins access to the collective.
Energy suppliers can put forward fixed-term tariffs from their existing repertoires or create exclusive, once-off deals that are cheaper than those available on the market. The kinds of tariffs offered are, of course, dependent on the collective power of the group.
An offer is made to the collective
The negotiated deal or winning bid of the reverse-auction will be offered to the individuals of the collective. In your offer, you will receive details about the deal’s contract length, the rates you will be charged for gas and electricity, and how much you can expect to save.
You will have a limited period in which to accept the offer, should you so choose. Remember, you are not obliged to switch your current supply; if you find a better deal elsewhere, you are free to reject the offer and leave the group.
Switching your supply
If you decide to accept the offer, you can commence the switching process. In most cases, you will be able to switch online, or scheme organisers will pass your details on to the supplier so that a member of its customer service team can facilitate the switch.
Be aware that if you are on a fixed-term contract, you may be charged an exit fee for switching providers before the end of your initial contract term. You should also check with your current provider for outstanding charges on your account; if any outstanding charges have been lingering for more than 28 days, you will not be able to switch until you have repaid them or set up a repayment plan.
How a collective switch can benefit you
Different sets of consumers can benefit from signing up to collective switching schemes in different ways: Consumers in rural areas, where energy prices are higher because of the cost of transmission and distribution, are likely to benefit from the bargaining power of a regional collective to secure cheap tariffs.
If you have never switched suppliers before, you might feel more comfortable engaging with the market in a collective; not only that, since you are likely to be on your supplier’s most expensive rates, you will save money whatever the offer.
Those who are used to switching providers regularly, or who don’t face higher energy prices due to relatively cheaper energy transmission and distribution costs, may in any case benefit from a wider scope of choice, especially if they receive an exclusive deal not available elsewhere in the market.
Are there any downsides?
You should be aware that collective energy switches can take several months to complete. If you can’t afford to wait, you would be better off looking for an individual deal.
In addition, you may not always receive the cheapest deal from a collective switch scheme. As such, we recommend using collective switching as a tool to broaden your options, while shopping around for the best deal.
Six collective switching tips
- Make sure that the scheme you’re signing up to is free
Before signing up to a collective switch scheme, ask the scheme organiser or service provider if there are any charges associated with registering your interest, going through with the switch after you have received an offer, or rejecting an offer made to the collective.
- Check the scheme’s timeline
If you are interested in a scheme, make sure that you check the scheme’s registration deadline, when the tariff negotiation or auction begins, and when you are likely to receive an offer. If this information is not freely available, get in touch with the scheme’s organiser to find out.
- Check your current tariff for exit fees
Take a look at your current tariff’s terms and conditions. If you are on a fixed-term contract and the scheme’s timeline projects that you will receive an offer before the end of your contract term, you may have to pay an exit fee to switch.
- Ask your current provider if you have any outstanding charges
If you are in debt to your current supplier for a period of 28 days or more, you will not be able to switch until you have repaid all your outstanding charges or set up a repayment plan. Charges that have been outstanding for less than 28 days will be included in your final bill.
- Check your offer’s terms and conditions
When you receive an offer from your collective switch scheme, be sure to take a look at the offer’s terms and conditions. What rates are you being charged? How long are you being tied down to the offered tariff? Are there any exit fees or hidden charges?
- Shop around
Your offer may not be the cheapest on the market, or it may not include energy relief schemes, such as the Warm Home Discount. You are not obliged to accept your offer and you will usually get a limited acceptance period. Use your time to shop around.