Will next-day switching be a reality by 2021?

By summer 2021 consumers should expect to switch their energy supplier by 5pm the next working day. Industry regulator Ofgem and the Data Communications Company are working towards creating a centralised switching service to facilitate this but one industry expert has referred to recent experiences with the smart meter rollout and questioned whether the timescale can be met. Adam John looks at the challenges that lie ahead.

With the rise of smart technology,  the 21^st century consumer expects an instantaneous service at the touch of a button.

As a result, energy players, big and small, are constantly on the lookout for new ways to improve consumer experience by harnessing the power of technology.

So too is the industry regulator which, in the past few years, has set out on a mission to alter the current switching arrangements to allow for next day switching.

With so much choice in the energy retail market, switching is a very big business. The latest figures from Energy UK show that 626,284 customers moved supplier in October and that the UK is on track to hit the 6 million mark in 2019.

Change may be welcome, but with the seemingly endless smart meter rollout and all the problems it entails seared into the minds of industry and consumers alike, next-day switching may sound to some like another well-intentioned but ultimately flawed endeavour.

The move has already been pushed back twice, with the initial start date scheduled for this year. It was moved to 2020 and now Ofgem envisages go-live in the summer of 2021.

According to Gareth Forrester, utilities business design expert at PA Consulting, recent experiences with the smart meter rollout highlight the need to “worry about whether the timescale can be met”.

“The many participants involved also need to be managed. We now have c80 energy suppliers, many of whom have simple IT approaches. This may prove beneficial, but could lead to endless delays as we try and get all suppliers up to speed”, he adds.

Forrester argues that it is vital that a “full change readiness programme” is put in place.

On average, switching currently takes between two to three weeks – a process which Ofgem says looks “slow and out of date” when compared to other markets.

What then have been the issues the industry needed to overcome in order to facilitate next-day switching?

The problem is exacerbated by outdated IT systems and poorly-managed underlying data which results in errors and problems during the switching process. Poor data is perhaps the current biggest obstruction to a faster switching experience.

Currently there are several databases which hold customer details for their gas and electricity supply, resulting in the issue of poorly managed addresses. In the past some customers have even been erroneously transferred to an energy supplier after the wrong details were entered.

Richard Hilton, the director of the switching programme at the DCC, explains further: “If you look at the number of failed switches, currently 80 per cent of them failed due to errors with addresses so what we are going to be doing is cleaning up the addresses currently held by all the organisations and centrally having a gold standard set of registrations”, he says.

The “gold standard” of address registrations he refers to is the Ordnance Survey BS7666 standard which is used by local authorities.

Ultimately, the CSS will be a harmonised system which ensures meter points are accurately matched to addresses from an authoritative database, therefore reducing the number of erroneous transfers and speeding up the process.

In addition to poor data, suppliers can use the mandated 14-day cooling off period to object to customer losses. However under the new system, they will have until 5pm the next working day for domestic customers, and 5pm on the second working day for non-domestic ones.

One industry expert tells Utility Week the current thinking is that customers will be able to waive the cooling off period if they wish, allowing for faster switching.

To facilitate the programme a £425 million package of reforms known as RP2a will require the Data Communications Company (DCC) to procure a new centralised switching service (CSS) that will facilitate reliable and fast switching across the gas and electricity markets.

Forrester says there are a number of “critical factors” that need to be met to ensure the success of next-day switching.

To this end, he asserts: “Data needs to be handled effectively, with this change requiring a consolidation of all industry data in one place, as well as the new complication of GDPR regulations.

“This is a great opportunity for cleansing and streamlining, but presents a very high risk of delays and difficulties.”

Hilton stresses that security must be “absolutely the heart” of the company’s data migration activity.

“We are very conscious of the data we will be responsible for. Making sure the data is securely transmitted is a critical part of the design”, he adds.

The technical solution, according to Hilton, is based on the Microsoft Azure system – a cloud computing service which allows businesses to build, manage and deploy applications flexibly.

Ofgem says pinning down precise figures on the number of erroneous energy switches happening as a result of poor quality address information is “notoriously hard”.

According to Ofgem’s chief executive Dermot Nolan, the current switching arrangements were largely designed during the “analogue age” and new technologies can facilitate the move to next-day switching.

Furthermore, Nolan cites the unreliability of the current process.

He says: “There’s long been a perception that switching is a hassle, and unreliable. Worse, that the anticipated savings consumers will make from switching won’t come to fruition.

“People’s negative experiences and the anecdotal evidence they hear from others only serve to reinforce these perceptions. And so consumers remain disengaged, missing out on the benefits that switching could provide.”

“The advent of smart meters, half-hourly settlement, price caps, and more fundamental changes to the energy system itself, means the time is right to reform the switching arrangements too.

“It can currently take a few weeks to switch supplier, but with the changes we’re making to overhaul the system, it will be much quicker and much more reliable. Where some switches used to go wrong (to the wrong supplier or at the wrong time), these will drop dramatically as the systems become more accurate.”

For a market to be competitive, the regulator says, it is vital that consumers can be confident that they can change their energy supplier easily and quickly, or else they may choose not to do so.

Recent figures released by the Energy Ombudsman revealed that switching leapfrogged customer service as the second most frequent complaint about energy suppliers, sitting behind only billing.

The figures show that in October, November, and December last year, switching was cited as a problem for 1.7 complaints to the Ombudsman per 100,000 customers.

This is the first time in over two years that switching was the biggest cause of non-billing complaints. Customer service complaints lagged just behind with 1.69, while billing complaints were far and away the most numerous, with 13.21.

Next-day switching is seen as a way of tipping the balance of power in favour of the customer. But, in order for it to be received in that spirit, it is vital that the rollout is not disruptive. The lessons of the smart meter project are there as a reminder of the consequences of where things can go wrong.