Response to Ofgem’s consultation on Faster and More Reliable Switching
Consumers want and benefit from reliable switching in the energy market. A reliable switching system minimises erroneous, delayed and failed transfers between suppliers. Failures in switching have a significant impact on how consumers perceive the energy market. Ofgem’s consumer research shows the impact that reliability in the switching process has on consumer trust in the energy market as a whole. A poor switching experience can jeopardise a consumer’s future engagement and reduce their propensity to switch. This dampens the competition required for the energy market to function in the best interests of consumers.
Citizens Advice supports faster switching that can be achieved in such a way that does not jeopardise the reliability of the switch. Energy UK research shows that 57% of consumers would prefer increased reliability to increased speed. However, this research also demonstrates that consumers would prefer to switch more quickly if reliability is not compromised, with 28% of consumers more likely to switch suppliers if switching occurred next day. It is right that Ofgem has pursued the objectives of reliability and speed in tandem through the switching programme.
Both domestic and micro-business customers will benefit from faster and more reliable switching so Ofgem is right to pursue a single system solution that covers the domestic and non-domestic markets.
We believe that the switching programme should deliver the benefits of faster and reliable switching in a way that minimises costs faced by consumers. The costs of the programme are upfront and occur in the near-term, while the benefits are more difficult to determine and occur over an uncertain 18-year time horizon. As the programme could cost the energy industry as much as £446m, it is crucial that costs are minimised wherever possible.
Based on the evidence presented by Ofgem, we agree that the proposed reform package (RP2a) is most likely to maximise the net benefits of more reliable and faster switching. Ofgem estimates these to be between £169m and £1,056m over 18 years. This option has been developed through a thorough, iterative process with industry, which has enabled detailed comment at each stage of development.