Collective switching: could you save money on your energy bills?

Collective energy-switching schemes promise to save consumers hundreds of pounds as well as taking the stress and confusion out of changing providers. But do they find you the best deal?

The idea behind collective energy switching is simple: a large group of people use their bulk-buying power to negotiate unique deals from energy suppliers.

Each collective scheme is marketed by a third party – these include a range of organisations from local authorities to newspapers. Many collective switches target groups that might not have changed energy supplier before.

How do they work?

Behind the scenes, the calculations, negotiation and switching is normally done by a price comparison site. Energyhelpline runs a lot of collective switches and pools all the households registered with separate schemes around the country into one big pot, then uses the group’s bulk-buying power to its advantage. Its last three collectives have saved consumers an average of £327 against standard tariffs, it says.

One attraction of collectives is that the winning supplier is often one of the big six, such as British Gas or E.ON, which might reassure people who are nervous about moving to a new deal with a firm they haven’t heard of. Usually the best-buy tables are dominated by newer and smaller suppliers, which first-time switchers may be hesitant to choose.

Energy suppliers like collective switches as they gain a large number of new customers in a short span of time. As with individual switches, they pay price comparison sites a commission of £25-£30 per fuel, which is normally split with the organisation marketing the scheme.

What savings are available?

Moneysupermarket runs a monthly collective switch called the Energy Bill Buster. Last year, the site negotiated British Gas’s cheapest tariff in four years, saving customers on standard rates an average of £357.

Stephen Murray, energy expert at Moneysupermarket.com said “Collective switches operated by Moneysupermarket have delivered tariffs that are either market-leading or among the cheapest deals available at that time.”

Although collective tariffs can be the cheapest deals on offer, this is not guaranteed.

When collective switching schemes talk about savings of £300 or more it’s important to note that this is in relation to the average price of the standard tariffs offered by the big six energy providers (British Gas, nPower, EON, Scottish and Southern, Scottish Power and EDF), not the cheapest deals on the market.

Mark Todd, co-founder of Energyhelpline, admits the savings offered by collectives versus best buys are modest. “Our winter collective winners beat the cheapest comparable (one-year fixed-price tariff) by £20 a year. They cost £732 a year and the cheapest open-market fixed tariff then was £752 a year,” he says.

How do you switch?

There are typically four key stages: registration, auction, personal offer and acceptance.

In the registration phase, the switch organiser will ask for some basic details – typically your name, address and details of your current gas and electricity tariffs.

Next, the switch organiser invites energy companies to take place in a “reverse auction”, where firms bid to supply energy to the group. Collective switches tend to use a one-year fixed-rate tariff as their headline deal, but they offer other rates too, such as two-year fixed rates, green tariffs, paper bills, prepayment deals and regional offers.

The winning tariffs are advertised to registered members and a personal offer made. Customers aren’t obliged to accept the offer. To be sure of getting the best deal you should compare the collective tariff to the cheapest on the market, factoring any exit fees on yout current deal into your calculations.

Any downsides to a collective switch?

One potential issue is the timescale involved. The process can take a couple of months before the switch begins.

It’s quicker to change suppliers using a price comparison site as the process starts straight away – a couple of months languishing on your supplier’s standard tariff could cost you dear.

Claire Osborne, energy expert at uSwitch.com, says: “Consumers looking to switch through a collective should first make sure they have fully assessed their individual situation because their personal circumstances could mean they find a better deal on their own, rather than in a group. In many cases it may be easier or cheaper for a consumer to switch individually.”

The easiest way to switch your supplier

  1. Head over to a price comparison site like MoneySupermarketEnergyHelpline or uSwitch and see which deals are available in your area.
  2. Enter your postcode
  3. Enter your usage information – For the most accurate comparison results, you’ll also need to input your household’s consumption details. You can get those off your most recent energy bill.
  4. Once you’ve picked your new energy supplier and plan, confirm the switch by providing your full address and bank details (if you’ve chosen a direct debit plan, which are usually the cheapest).

 

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