18 Jan 2013

How ‘collective switching’ could reduce energy bills

Consumers are being offered a chance to save money on their energy bills by joining forces with their neighbours as part of a growing trend.

Energy bills could be reduced by communities

More than 3.5 million UK households have been given the chance over the last six months to club together and use their joint purchasing power to negotiate the best deals with their energy suppliers, with millions more expected to be given the same opportunity by their local council over the coming year.

Since the first council run “collective switching” initiative was launched by South Lakeland District Council in June 2012, more than 25 local authorities have set up or are in the process of developing a variety of schemes, with more than 80 projects reported to be in the pipeline.

Rise in bills

It comes as E.ON customers see a sharp rise in their bills, with energy tariffs rising by an average of 8.7 per cent from today.

And to compound matters, the latest price hike comes at a time when households up and down the country are turning up the thermostat, with parts of Britain covered in up to 10 inches of snow.

But as people move to combat the rise, the Local Government Association predicts the “collective switching” revolution to grow significantly in 2013, helping residents to save on average between £60 and £250 on their annual gas and electricity bills.

Bargaining power

Most existing schemes have focused on supporting their local communities, using collective purchasing to ensure residents have access to the best deal possible, particularly those living in fuel poverty.

Other schemes have been extended to include local businesses to help provide a boost for the local economy. However, some councils have also developed models for “collective switching” which are being rolled out across other local authorities to extend the reach of each scheme and increase their collective bargaining power.

As a trusted neutral party, councils can negotiate with the big energy companies on behalf of local residents, harnessing their collective buying power to secure the best deal.

Switch supplier

Estimates suggest that 70 per cent of those who take part in collective switching will save money. But because there is no obligation, those who sign-up can make a decision on whether to switch or not based on their individual position once an offer has been made by an energy company. “Collective switching” offers an incredibly easy and flexible way to switch energy supplier.

Cllr Mike Jones, chairman of the LGA’s environment and housing board, said: “Everybody has the right to switch their energy supplier. But finding the right tariff is often unclear and the process of switching is not made easy. This is particularly true for elderly or vulnerable members of the community who might be confused by the process or scared that if something goes wrong they will be left without heating or electricity.”