Guide to collective switching
Your energy bills may be one of your biggest expenses as a household, so it’s always worth taking steps to find the best deals on domestic gas and electricity. But with hundreds of tariffs available to choose from, it’s not always easy to know which are right for you.
One approach that you might have heard of is to take advantage of a collective energy switching scheme. So what exactly are these schemes, how do they work and could they benefit you? Check out our guide to collective energy deals to find the answers to these questions and more.
What is collective switching?
Collective switching might sound complicated, but in fact it’s based on a very simple principle. It involves a group of people getting together and using their collective buying power to secure better deals from energy suppliers. These deals are typically put together by third parties. For example, they could be arranged by a switching website, private company, local council, housing association or even a national newspaper.
The idea behind these schemes is that by getting together in large groups, potentially tens of thousands strong, energy users have more bargaining power than they would if they were looking for deals as individual households. If all these people agree to move to the same supplier at the same time, it’s in the interests of the energy provider to offer a discount. These arrangements first became popular nearly a decade ago in 2012 when the government endorsed the idea. In October of that year, the government even ran its own collective switching scheme. Initially, this approach to procuring energy deals didn’t live up to expectations in terms of the interest generated among consumers. However, it has seen renewed enthusiasm more recently as people look for different ways to bring their energy bills down.
How does collective switching work?
There is no set model in terms of how collective switching schemes work. However, in most cases, there is a bidding process whereby a third party organiser will invite energy companies to offer attractive tariffs on the basis that they will secure a high volume of sales for their deals. The emphasis is usually on price, so the supplier that offers the cheapest tariff will often be awarded the contract. However, other factors can be considered too, including energy providers’ track records when it comes to customer service.
The deal agreed will be exclusive to the group invited to take part in the scheme. For example, in the case of a price comparison site, the switching scheme may be open to the site’s customers. Alternatively, if the scheme is being administered by a housing association, certain groups of residents may be invited to take part. These collective arrangements are usually available for a limited period of time or restricted to a certain number of participants. Once the specified time has elapsed or the required number of people have signed up to take part in the scheme, it closes. This is when the bidding from energy suppliers starts. Because these schemes generally have set deadlines and switching dates, it’s important to be aware that if you wait too long to sign up to one, you risk missing out.
Collective purchasing
Collective purchasing schemes work slightly differently to collective switching. As mentioned previously, collective switching refers to the process of a third party negotiating competitive tariffs on behalf of a group. In contrast, collective purchasing is where a third party buys energy directly from the wholesale market with the intention of supplying it to a group of energy users. To do this, the third party has to become a licensed energy supplier – or alternatively apply for an exemption from the requirement to have such a licence.
How to find a collective switching scheme
There are different ways to find collective switching schemes that you may be eligible for. Some of these deals may be advertised through social media, newspapers and newsletters. Local authorities sometimes insert leaflets outlining the details of these schemes into council tax bills. On energy comparison websites, collective switching scheme offers may simply show up in your results when you search for the best tariffs.
The third parties that run these switching schemes may require you to provide various pieces of information about yourself, such as your current tariff and supplier, whether you’re on a fixed-term contract and whether you’re interested in a green energy tariff. Because these schemes can be promoted in various different ways and through a variety of channels, it’s important to keep an eye out for them if you think this type of arrangement may benefit you. This will help ensure you don’t miss the best opportunities.
Can collectives save you money?
According to energy regulator Ofgem, many homes in the UK could save around £250 a year by switching to more competitive deals, and this figure is even higher among those who have never switched energy plans.
Because collective switching can help you to access more competitive deals through enhanced buying power, these deals could see you save potentially significant sums of money each year on your energy bills. However, exactly how much you stand to save as a result of these deals will depend on your individual circumstances. As a general rule, whether you’re switching energy deals as an individual consumer or as part of a collective, it’s always important to review your options carefully. Also, make sure you compare any collective switching deals with the tariffs currently on the market. You don’t want to rush the decision-making process and potentially end up with a deal that costs you more than necessary.
Also, bear in mind that as well as price, you should pay attention to the standard of customer service you’ll receive with your energy package.
Other ways to save money on your energy bills
Switching energy suppliers, whether individually or as part of a collective, may be one way to save money on your energy bills, but there are many other things you can do too. Here are some of the most important:
Pay your bills by direct debit: It’s often cheaper to pay your gas and electricity bills by monthly or quarterly direct debit, rather than to pay on receipt of bills or to use a prepayment meter. This approach also has the added benefit of meaning you don’t have to worry about missing payments.
Lower your energy usage: Reducing the amount of gas and electricity you use at home will not only lower your costs, but also cut your household’s carbon footprint. There may be a variety of ways that you can bring your energy usage down. For example, did you know that turning your thermostat down by just 1°C could shave up to 10 per cent off your heating bill? Turning lights and appliances off when you’re not using them could also save you money, and making the switch from regular to energy savings light bulbs could help too. To make it easier to keep tabs on your energy usage and to help you find ways to reduce waste, you could also get a smart meter.
Make your property more energy efficient: Taking steps such as improving your insulation, getting a new boiler and installing renewable energy systems like solar panels will cost you money upfront, but it could lead to significant savings on your bills in the long term.
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