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Collective energy switching

Collective energy switching schemes put power back in the hands of the people when it comes to gas and electricity prices. Find out more…

Key points

  • Collective bargaining power may give access to more attractive rates than you'd get if you shop around yourself
  • Deals may be good because energy suppliers use collective switching to target specific groups and to get around tariff caps
  • Collective switches are available for a limited time
  • You'll need to be part of a 'community' or 'closed group' to benefit from the winning tariff
  • The larger the community, the greater the group's chance of securing market-leading deals

High gas and electricity bills and the huge profits that energy companies seem to keep delivering have been a source of enormous frustration for UK consumers.

We all need to keep the heating and lights on, and many have been left feeling there's nothing they can do other than somehow find the extra cash to keep paying the ever-rising bills.

There are, of course, energy money-saving tips you can follow to keep the costs down and shopping around for gas and electricity - considering small energy suppliers as well as the 'big six' - helps to keep competition in the market and hopefully drive prices down.

But we've also seen the rise of a more innovative way to keep pressure on the fat cats and deliver power into the hands of the people… collective energy switching, which began with government backing in 2012.

"Collective switching revolutionises the idea of switching energy providers," said Gocompare.com's Ben Wilson.

"Instead of customers having to find a better deal alone, it makes energy companies compete for you and your fellow consumers' business.

"Using the collective bargaining power of heaps of customers means that you could potentially secure a better deal on your gas and electricity."

What is collective switching?

Collective switching is when a large group of people, known as a community or closed group, uses its collective purchasing power to negotiate its own tariff with energy suppliers.

This gives the group the potential to secure more attractive deals than those advertised to the wider market.

A collective switch typically works in the following stages:

  • Become part of a community or closed group
  • An exclusive tariff is  negotiated with energy suppliers and announced to the community or closed group
  • Switching opens - during this time members can switch to the winning tariff
  • Switching closes - after which it's not possible to switch to the exclusive deal anymore

Where can I find a community?

Almost any group can found an energy-switching community.

Did you know...?

  • In February 2015 the Department of Energy and Climate Change (DECC) said that 13.5 million UK households were missing out on £2.7bn of energy savings by not switching suppliers
  • The DECC said that millions of people could save around £200 a year - and some could save even more

It could be led, for example, by a price comparison website such as Gocompare.com, a newspaper, a local council, or a combination of such groups.

It may be as simple as being a customer of an organisation or company, so keep on the look-out for any direct marketing mentioning collective switches, for example emails and advertising.

Remember that the offer will only be open for a limited period of time, so you better move quickly.

The more people the group leader(s) can attract to its community the greater its negotiating power will be, meaning that larger communities will have more chance of getting access to market-leading deals.

Do I have to switch if I'm a community member?

No, there's no requirement for you to switch if you're a member of a community. That's completely up to you.

However, community members will typically be able to see the collective switch deals on offer against regular tariffs on the market and will be free to decide whether to take the collective switch, to change to another tariff on the market, or to stick with their existing deal.

How can collective deals offer tariffs I can't find elsewhere?

Collective bargaining and haggling power are the main reason why good deals can be secured as energy suppliers bid to win the community's business, but the unique nature of each collective switch also allows for the targeting of niche areas.

An energy supplier may be targeting a particular demographic or user group, or may just be seeking to meet targets for customer numbers

An energy supplier may be targeting a particular demographic or user group, or may just be seeking to meet targets for customer numbers, so could offer highly attractive terms that other suppliers may not want - or be able - to match.

As just one example, regional energy prices can vary significantly. It may be that a particular supplier will want to claim market share from a rival in a certain part of the country and will consequently offer a tariff likely to attract customers from that region.

The collective switch leader may offer its community a range of 'winning' tariffs including, for example, various regional winners, or winning prepaid meter tariffs.

Suppliers can use collectives to get around legislation

Another reason for the attractiveness of collective switches is that energy firms can use them to get around rules that limit the number of tariffs they have available.

Did you know...?

  • When a supplier offers a tariff to a 'closed group' collective it doesn't have to alert its full customer base

In a move designed to simplify the market, regulator Ofgem implemented legislation that only allows energy suppliers to have four main tariffs (this restriction may be abandoned in the longer term following criticism of the way it works).

When an energy supplier changes any of its four main tariffs it needs to tell all its existing customers, who may be alerted to a better deal.

Many of the bigger suppliers make huge profits from long-standing customers who never tend to switch.

Such customers are typically on the most expensive standard tariffs, and if they were alerted to the fact that much cheaper deals were available from the same supplier they would be much more likely to move, cutting off the supplier's source of easy profits.

However, when a supplier offers a tariff to a closed group collective it doesn't have to alert its full customer base. Small energy suppliers

This isn't great news for smaller challenger energy suppliers used to regularly win community business, there's now much more competition from the 'big six' in this area, meaning that almost any energy firm could be the choice for the collective switch.

What happens when the collective switch ends?

After a collective switch ends, if you haven't taken up one of its tariffs you'll no longer have access to the rates that were negotiated.

Remember that a successful community leader is already likely to be organising the next community switch, which may be planned for a few months down the line.

If you've signed up previously, you'll probably be notified of this through the community's marketing channels.

By Sean Davies