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Energy secretary Ed Davey has predicted an acceleration of customer tariff switching as new retail energy reforms take effect, saying the impact could disrupt the current retail energy model.
Davey said the rise of collective switching in particular would have a “big and direct” impact on the UK’s energy customer base because the shift in customers happens “in one go”.
But as still recent reforms to switching times comes into effect, the number of people switching tariffs will increase further.
In recent years smaller independent suppliers have eroded the share of large incumbent energy suppliers and Davey said collective switching had helped new entrants to grow more than they otherwise would have.
“[Collective switching] is disruptive, and the big energy companies don’t like it,” Davey said at a MoneySavingExpert.com event.
He told Utility Week that although it has taken time to regain consumer trust and simplify the retail sector, the market was now ripe for greater consumer engagement.
The trend in so-called sticky customers – who remain on standard tariffs despite huge potential savings from other offerings – was highlighted by the CMA in its recent report on the ongoing probe. Davey said the role of doorstep misselling was a root cause of the lack of consumer engagement with the energy industry.
The systemic misselling took place between 2008 and 2013 but “has left a real memory of mistrust” for many people which cannot be underestimated, Davey said.
“We’ve only just managed to get switching times down – this has only just come into effect,” he added.
But in the meantime the market has seen growth in the smaller suppliers, and the suppliers themselves have had the chance to prove their mettle, he said.
Reports suggest that independent players might soon hold 30 per cent of the market, up from just under 10 per cent today, which suggests switching at even higher levels to take into account customers which switch to a different vertically integrated utility.
“Switching is definitely on the up,” Davey said.
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