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Collective switching for better energy deals?

Cornwall Together launchCornwall Together, was the UK's first regional collective buying scheme for energy consumers, launched in July 2012

How often have you thought about switching energy suppliers to get a better deal, and then had second thoughts when confronted by all the hassle and uncertainty. Memories of door-to-door cold callers and their dubious claims about saving you money still linger, and put many people off the whole idea. But there is a stress-free way of saving money that uses the power of group purchasing to secure the most competitive prices from the energy companies; it's called collective switching.

Power to the people

Essentially, a group of people - the more the better - join together in negotiating with the energy companies to get the best deal on offer. This suits the company because they stand to gain perhaps hundreds or thousands of new customers in one fell swoop. And it suits the customers because the company provides their most competitive deal on gas or electricity, or both. The consumers can also demand other benefits as part of the deal, for example the assurance of 100% renewable electricity, or free loft insulation.

Collective switching schemes are generally run by a third party, such as a price comparison website, local authority or community group. Initially, all you need do is express an interest and provide some basic information about yourself and your energy usage. You don't even commit to signing up when the offer is made; you can carry on with your existing supplier and tariff if you want.

Saving en masse

For example, in early 2012 the consumer magazine Which? ran a large national internet campaign in which 290,000 people signed up. They then conducted an 'auction' among energy suppliers. The winner was Co-operative Energy, which being a small company could only take on 30,000 new customers! These stood to save on average some £123 per year. The others were offered a slightly less attractive deal from EDF. Subsequently, various other players have entered the arena to offer collective switching. One of the earliest was the Eden Project, which was the lead partner in the Cornwall Together initiative. This scheme continues to run as Community Energy Switch, and is open to anyone regardless of where they live in the UK.

These schemes can vary in how they operate. The UK website, thePeoplesPower, is a community interest company run as a social enterprise. It negotiates on behalf of anyone in the UK who signs up, regardless of where they live. It's free to register your interest, with no obligation; the organisation takes £5 from each referral fee received from a supplier, and passes on £10 to the customer as a cashback payment. This compares with the £30-60 per customer typically charged by price comparison sites.

The website MoneySavingExpert (MSE), in collaboration with Money Supermarket, offers collective switching deals by arranging special fixed-rate, limited-term tariffs with suppliers. It receives a fee from the supplier for each customer signed up, and then hands over half of that as a 'cashback' payment to the customer, typically £25 for a dual-fuel deal. Potential clients must pre-register with MSE's Cheap Energy Club, and they will be notified by email when a deal is pending..

Points to consider

  • Make sure the information you provide will be kept safely and securely
  • Is the service free or will you be charged? What commission will the scheme provider receive from the energy company for referrals?
  • How long will it take?
  • How will you know if the offer is better than your current deal?
  • Will you need to pay a termination fee to your existing supplier?

A factsheet giving more information is available from GOV.UK.