Poor timing as five day energy switching to launch
Energy regulator Ofgem confirmed that the ‘Centralised Switching Service’ will go live on Monday 18 July.
It will require energy providers to ensure switches are completed within five working days, down from the current 21 working days. This must be done within the timeframe where the customer hasn’t specified the speed of the switch, for example if they want the switch to take longer.
If energy suppliers don’t meet the timeframe, there would be an automatic payment to billpayers. As of 1 May 2020, billpayers automatically receive £30 if they experience delays or mistakes when switching supplier.
The faster energy switching has been years in the making and is estimated to have cost energy firms £426m in upgrading their systems and processing to meet the new target.
But, given the current volatile energy market with soaring prices, supplier failures and millions of billpayers on standard variable tariffs as fixed deals dried up, the launch date comes at a challenging time.
Indeed, energy switching figures for the first three months of the year crashed to a record low, with just an estimated 225,000 electricity switches and 158,000 gas transfers reported.
By comparison in Q1 2021, there were 1.37 million electricity switches and 959,000 gas transfers.
Ahead of its launch, there were concerns that the faster switching programme was being introduced at a time where the market is extremely volatile.
According to Cornwall Insight, the go-live date is coming at a time when high prices are having a severely limiting effect on switching rates, and interventions by the regulator aimed at addressing wholesale volatility “will reduce switching rates when commodity costs fall”.
Hattie Lunn of Cornwall Insight, said: “The full benefits for consumers and competition of faster switching will not be felt next Monday, but further down the line when the market has stabilised.
“Against a different market backdrop, the new and improved switching experience may have been more immediately impactful, however under current market conditions, it seems like a small move forward against the number of other challenges both suppliers and consumers are facing. Benefits will come over the longer term with Ofgem also suggesting it may seek to reduce these timescales even further in the future after the initial transition has taken place, expecting domestic switches to occur next working day, and non-domestic switches within two.”
‘Good deals are few and far between’
Richard Neudegg, head of regulation at Uswitch, said:
“The five-day switching requirement is a huge improvement on the 21 days it currently takes to move from one energy supplier to another.
“A faster and more reliable switching programme marks a big achievement for the industry to make switching simpler and quicker – giving consumers the chance to take control of their energy bills.
“It is unfortunate that this initiative comes at a time when good deals are few and far between and switching is at record low. Customers will only be able to truly take advantage of this when the market becomes competitive again and better deals become available.”