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Response to Ofgem's consultation on protecting consumers of collective switching schemes

11 July 2014

Introduction

Citizens Advice welcomes the opportunity to respond to Ofgem’s consultation on collective switching. We broadly agree with the interim regulatory measures proposed in order to protect consumers in collective switching schemes.

Our work on collective switching to date includes research ranging from qualitative evidence of consumer sentiment towards the collective switching concept1 to exploring opportunities for low income energy consumers in Wales2, a report making the case for collective switching in the age of connected consumers3, and engagement with service providers to understand the emerging issues.

While the regulator works on its longer term approach of developing an enduring regulatory framework for TPIs (Third Party Intermediaries), we are pleased that the immediate TPI issue of collective switching is being addressed. We believe it is essential that this work stream is developed and progressed as quickly as possible.

We support Ofgem’s assertion that collective switching could increase levels of engagement for vulnerable and disengaged consumers. Many schemes have been promoted to vulnerable and disengaged consumers and figures from the service provider iChoosr show that in their last auction, carried out in February 2014, 34.8% of the vulnerable4 group of consumers made the switch to the winning supplier5. Also in this auction 65% were first time switchers, illustrating that collective switching is reaching disengaged consumers. This is consistent with Ofgem’s aspirations to help these consumers to engage in the market.

Collective switching is also an opportunity to allow smaller suppliers to benefit from the diminished costs of market entry. It challenges the grip that a small number of incumbents currently enjoy6. In a recent auction7 two smaller suppliers, one a very recent entrant to the market, Green Star Energy, and Ovo Energy, made winning bids with their tariffs. Ovo Energy won the auction with a market leading standard monthly Direct Debit tariff.