For too long, consumers have been trapped by expensive energy bills. While policy makers have been left scratching their heads to find a solution in a post-price cap market, 53 per cent of domestic customers remain on a default tariff.
Last week, Ofgem released results from trials they have been running to test different ways of encouraging customers to switch supplier. Energyhelpline ran three of these, and the regulator believes they have “proven beyond doubt” that these types of interventions can help customers switch and save.
We wholeheartedly agree with Ofgem. If our three trials were scaled up, two million of the UK’s most disengaged customers could save an eye-watering half a billion pounds on their energy bills.
These trials follow the Competition and Markets Authority’s 2016 energy market Investigation, which called for the creation of a database of eight million ‘disengaged customers’ – those who have been on the expensive standard variable tariff (SVT) with the same supplier, for over three years.
Over the course of the last year, our three trials with the regulator have helped customers save over £13 million on their energy bills – an average saving of £263 per customer. Our process for contacting customers was simple.
A letter was sent to each customer, informing them that they could make a saving by either switching to the collective tariff that we negotiated, or to another deal on the market. Customers could then switch online or by calling our specialist call centre.
The results were outstanding. Over a quarter (27 per cent) of those who participated in the trials switched their supplier, meaning almost 50,000 customers saved.
As is often the case, those that end up paying the most are the ones that can least afford it. That’s why I am so pleased that our trials showed exceptional value in helping some of the UK’s most vulnerable customers save money.
During our trials, 42 per cent of customers that could be described as vulnerable – over the age of 75, on the priority services register, retired or unemployed – switched and saved with Energyhelpline.
Staggeringly, if we scaled up the results from our first trial and applied it to all eight million customers, those classified as vulnerable would save over £260 million.
In isolation, it is clear that these trials have helped consumers. Yet the true test of their success is to see whether they are a flash in the pan that will see customers roll back on to pricey SVTs or whether they will actually drive long term engagement.
That’s why a year on from the first trial, Energyhelpline contacted customers as they approached the end of their deal to see if they would be interested to see what the market has to offer.
Promisingly, almost 40 per cent of consumers in the first trial who had switched decided to switch again one year later; 79 per cent of these consumers switched to a supplier outside the big six and 70 per cent saved between £200 and £500.
While these are early days, this is proof that our trials can and have delivered long term engagement in the energy retail market.
Ofgem is now reflecting on these results, but with customers trapped in expensive deals, why wait?
There are, of course, a number of areas that need to be addressed before engaging with all eight million customers and Energyhelpline believes solutions to these challenges can be found through further trials.
If Ofgem was to press ahead without further assessment, the impact on the energy retail market will be profound.
As our trials have shown, disengaged customers are interested and more than willing to switch supplier. This could result in a substantial transfer of customers in a short period of time from expensive tariffs onto cheaper deals, meaning that some suppliers are likely to lose a significant amount of their customer base.
Worryingly, the impact this could have on market conditions is unknown, which would pose a threat to the development of the energy retail market.
Ofgem also needs to measure how exactly it will engage with all eight million customers. They need to consider how to manage high volumes of expected switches and provide reassurances that customers who switch are not stranded by a supplier which cannot manage volumes and goes bust.
While these challenges are real and significant, they can be tackled head on.
Energyhelpline has set out its roadmap to engaging with eight million disengaged consumers and we have recommended that as a next step, Ofgem should hold several larger trials early next year to assess the impact this remedy would have on the market.
We have spent the last year talking to stakeholders representing government, industry and consumer groups. The support for these trials has been overwhelming, which given the powerful results, isn’t surprising.
Some of the UK’s most vulnerable consumers have saved a significant amount of money and these trials are beginning to reverse years of apathy within the market. Energyhelpline is clear: without further assessment the impact on the energy retail market would be profound.
Equally, disengaged customers should be allowed save money now. Further trials are a no brainer.