What is collective switching?
Posted by Tasha Kosviner on 13 November 2013 at 11:01 am
Q. What is collective switching and should I get involved?
A. Collective switching is where a group of individuals club together to negotiate a better deal on their energy bills. While there is no set model for how such a scheme operates, it usually involves a third party such as a local council, charity or business, acting on behalf of the group.
What's in it for me?
Bulk purchasing often entails a cheaper price per unit and energy is no different. A recent government report examined 27 different schemes and found they’d saved a total of £2.7m – an average of £131 off each householder’s energy bills. Scheme organisers may be able to offer other benefits too – a commitment to green energy, discounts on energy saving products and the peace of mind of knowing that someone else is shopping around for the best deal for you.
How does it work?
Initially you will probably be asked to simply register your interest so that the scheme organiser can get an idea of the number of people willing to join and can begin negotiations on the group’s behalf. The organiser will then hold an auction, usually online, so energy companies can bid to become the group’s chosen supplier. Once the auction is closed, you will be given a certain amount of time in which you can accept, or reject the offer. You can register you interest in as many schemes as you like – you are not obligated until the offer has been made and you have accepted the new rate. The organiser will then organise the switch over on your behalf – you should never be without power whilst the switch takes place.
What information do I have to provide?
You will need to provide your name, address and contact details, along with details of your current tariff and supplier, your annual energy consumption and the method by which you pay your bill (direct debit, cash or cheque, prepayment etc). All this information should be available on your energy bill or from your current supplier.
Can I set up a scheme myself?
Setting up a scheme yourself means cutting out the third party supplier, and essentially becoming a licensed energy supplier yourself. This is not without its pitfalls, and the government has published an introduction to setting up your own collective purchasing scheme. Many independent collectives use a software provider called ichoosr which provides the online sign up and coordinates the auction where energy companies bid to become a group’s chosen supplier.
What’s the catch?
Let’s be clear: in this age of spiralling energy costs, collective switching which promotes competition and gets consumers a better deal, is probably a Good Thing. However, even if it makes your bills cheaper, it will not cut your energy consumption. In the early stages of the switch, you might want to consider putting aside the money you've saved in order to pay for some other energy saving measures in your home.
And, as with any new purchase, there are things to look out for before you decide which scheme, if any, to go for.
There are lots of collective switching organisations out there – from Which?’s Big Switch which has 250,000 members, through to smaller community-based groups. Your local council may well offer a collective switching scheme too. All schemes will provide slightly different terms so make sure you read through the information carefully before accepting an offer.
Check that the auction is open to a large number of energy suppliers, so that competition to provide the best price will be more intense.
You may wish to check who is making money from the switch: some organisers will charge you a finder’s fee, while others will make their money by charging a fee, ranging from £2-£40, to the energy supplier for each member who switches. Some will be social businesses, community interest companies (CICs) or charities while others will be businesses set up to make a profit. The Which? scheme was criticised last year for the amount of money it stood to make from its collective switching scheme.
Finally, you should be aware that collective switching won’t always guarantee the best price for you so it is still worth shopping around yourself – for example by using a price comparison website – to reassure yourself that you are getting the best deal.
From the blog
Time for an energy bill revolution (June 2012)
If you have a question about anything in the above blog, please ask it in the comments section below.
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