Saturday, 5 April 2014

Collective switching schemes – a waste of money and energy?

Today’s announcement about a government scheme targeted at buying cheaper energy through collective switching schemes costing £100 more per household than it saved, has led me to question yet again who is it that comes up with these ideas and throws public money at them in the name of customer choices without really thinking it through. This time it was the Department for Energy and Climate Change who gave £5 million to local councils to promote collective buying schemes in order to support vulnerable consumers or those in the fuel poverty trap, helping them switch energy supplier and saving themselves money. A very laudable thought, but in reality the average cost saving after switching was £131 but it cost £231 per household to help them switch!

Consumers switching off to collective bargaining schemes

Collective switching is basically collective bargaining, with the thought that if there is large number of people in the one scheme looking for the best price in energy, then you can negotiate a good deal for a large amount of people. Over 190,000 people registered for this scheme by the end of 2013 but according to Radio 4 You and Yours consumer programme, only 10% of those households went on to switch suppliers. This year the figure has dropped to 10,000 registering an interest.

The presenters spoke with one council in Greater Manchester who got 5,000 people to sign up, on average they all saved around £126 per household but the cost of doing this was £86. Oldham Council spent their grant of £400,000 on marketing and dedicated energy help lines to get residents to sign up and their spokeswoman said that although they were one of the Councils that managed to save more than they spent, they would not be involved in the scheme again.

Only 7 out of 31 councils saved more than they spent

Out of the 31 schemes set up with local authorities only 7 councils, including Oldham Council, saved more than they spent which does seem a shocking waste of public money. The Department for Energy and Climate Change said that the exercise was “to increase engagement” and they had now got useful data from these pilots to “help future collective switching schemes engage with consumers”. Surely they could have increased their engagement in a much cheaper way, for example, we all pay our council tax so our councils have information on all of its residents and its businesses, why not send out the information and get the councils to hold awareness raising sessions on collective switching. Then target the £5million at helping individual households to insulate their homes or gain access on line and give advice and support on how to compare energy prices.

If you were involved in collective switching and it worked for you, let us know – we’re listening!

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