Households to be automatically switched to cheaper energy tariffs
About 5.8 million households switched energy supplier last year, saving an average of £290. But research by Ofgem suggests that less than half of British households regularly shop around for a better energy deal.
As a result, the government is taking action to tackle the ‘loyalty penalty’, where energy companies place longstanding customers on the most expensive tariffs.
Business and energy secretary Kwasi Kwarteng has published proposals to trial automatic switching. Under the plans, some consumers on costly tariffs would be automatically switched to cheaper ones unless they opt out.
The proposals include creating a framework for ‘opt-in switching’ by 2024, where consumers on the most expensive tariffs would receive personalised switching advice to switch to a better value tariff.
The plans are designed to protect customers from rip-off energy deals, saving consumers money on their energy bills, and increase competition by encouraging suppliers to introduce fairer tariffs.
Ministers hope the plans will also mean that more consumers will switch to tariffs powered by renewable electricity.
Kwasi Kwarteng, business and energy secretary, said: “We want to unleash a wave of competition within the energy market and keep energy bills low so households across the UK can keep more money in their back pockets.
“Although more of us are now shopping around for the cheapest tariffs, the existence of better deals on the market is not sufficient in itself to drive consumer behaviour. That’s why we will make the switching process even easier so we can tackle the ‘loyalty penalty’ and ensure everyone pays a fair price for powering their homes.”
In another move to better protect the most vulnerable energy consumers, the government is also extending the Warm Home Discount Scheme until 2026. This will knock £150 off the electricity bills of many pensioners and low-income families, supporting an extra 750,000 consumers.
Tom Lyon, director of energy at energyhelpline, said: “Opt-in switching is a proven initiative that will drive positive outcomes for the most disengaged consumers. We welcome these proposals and believe they could generate levels of long-term competition into the energy market like we’ve never seen before.
“Previous opt-in switching trials helped significant numbers of consumers switch energy suppliers than otherwise would have; a widespread rollout will empower customers to drive down the cost of their bills.”