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Don’t turn off to switching

Posted on 4 January 2012

January is usually a peak month for switching energy suppliers as households feel the pinch of their winter bills and budget for the year ahead. Yet despite all the encouragement to switch and all the marketing hype from the switching sites, Government figures released yesterday show that switching activity is actually in steady decline from its peak year of 2008. This is despite energy prices having reached record highs recently. The following table shows the number of customers who have switched from one supplier to another during the last five years. These figures are already a year out of date but more recent quarterly updates from DECC confirm the trend.

Year Electricity Gas
2006 4.836 3.912
2007 5.157 3.981
2008 5.427 4.158
2009 5.022 3.825
2010 4.746 3.558
Figures in millions
How might we explain this? I think there are three possible reasons. Firstly, some of those people who switched in the past may not feel the need to switch again. They made such a saving on their first-time switch that they believe their tariff is still competitive. They may be in for a nasty surprise. Suppliers are notorious for exploiting customer apathy. Those headline grabbing special offers don’t mean you remain on special offers once they’ve expired. That’s why we promise consistently competitive pricing. Peace of mind is more important than forever chasing the cheapest deal, we believe. Secondly, others who have switched in the past may feel cheated by the experience. They might have been mis-sold an inappropriate tariff with the result that they are paying more not less. Ofgem data shows 40% of switchers pay more after switching. Believing all suppliers to be as bad as each other, this group are mistrusting. That’s why we chose to offer just one simple tariff and insist on doing a price comparison before you sign up. And, thirdly, the majority of the population who have never switched don’t see the point or believe it’s too difficult. This is concerning because these disengaged consumers are the very ones likely to benefit most from shopping around, at least when expressed as a percentage of household income. And worries about how difficult it is to switch are unfounded; it takes just 5 minutes online or 10 minutes on the phone and the new supplier does all the rest. As a new supplier determined to shake up the market, we’re keen to understand what drives switching activity. Is it news events? Is it the shock of a big bill? Or is it word-of-mouth recommendation? So we’re working with Consumer Focus and Ofgem to try to get published much more frequent and detailed data on switching volumes. Then we can all see what’s really going on. We think that’s in the public interest.

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