Ofgem has decided to press ahead with plans to bring in changes to switching arrangements to let customers swap supplier by the end of the next working day.
The regulator will introduce a package of reforms known as RP2a which will require the Communications Company (DCC) to procure a new centralised switching service (CSS) to enable fast and reliable switching.
The announcement follows the conclusion of a consultation launched in September. Explaining the regulator’s thinking in a decision document, Ofgem chief executive Dermot Nolan said: “The current switching arrangements were largely designed for a more analogue age. The advent of smart meters, half-hourly settlement, price caps, and more fundamental changes to the energy system itself, means the time is right to reform switching arrangements too.”
“It can currently take a few weeks to switch supplier, but with the changes we’re making to overhaul the system, it will be much quicker and much more reliable. I’m calling on industry to now start putting in place the practical arrangements to deliver these changes,” he added.
“Everyone, including energy suppliers, those responsible for networks and those who provide the systems used for switching now, will need to work with Ofgem to plan and deliver this change as quickly and efficiently as possible.”
The regulator’s assessments of both the financial and non-financial impacts found “strong grounds” for action: “When combined, the case for the proposed intervention is very clear.”
Suppliers will not initially be obliged to switch customers by the end of the next working day. However, Ofgem said it will introduce a “regulatory backstop” requiring them to switch customers within five working days.
“We expect that competition and customer choice will result in next-day switching becoming the norm,” it explained. “Should that not be case, we will consider whether it is necessary to further tighten the switching speed requirement in the supply licences.”
The CSS will be responsible for ensuring meter points are accurately matched to addresses from an authoritative database for Great Britain.
Gas and electricity switching processes will be harmonised where appropriate, the document adds. In gas, suppliers will initiate a switch, rather than shippers as currently happens. Should a supplier wish to object to a customer loss, they will have until 5pm the next working day for domestic customers, and 5pm on the second working day for non-domestic ones.
The watchdog said it will continue with plans to create a retail energy code as described in the consultation.
Meanwhile, Ofgem has also announced the launch of a new collective switching trial in the coming weeks, involving 50,000 disengaged customers from an unnamed “large supplier”. Those taking part, none of whom have switched energy supplier for more than three years, will be offered a new deal negotiated on their behalf by a partner organisation appointed by Ofgem.
Unlike other collective switching schemes, customers will not be required to enter details of their existing tariff, making it easier to take part. They will be able to take up the offer via the partner’s website or by phone and will also be able to see a “wide results” search, showing them the savings they could make with other tariffs across the market so they can make a fully informed decision.
Ofgem said “simplified collective switches” could be rolled out to more customers in future, depending on the outcome of the trial.
The regulator is also launching another trial in which 250,000 customers on expensive tariffs will receive up to two letters or emails from their suppliers informing them about three cheaper deals, including from rivals.
It follows the success of a smaller-scale trial last year, which Ofgem said led to a trebling of switching rates. The results of the trial were published today (12 February).