The consumer organisations Which? And 38 Degrees have joined forces to launch ‘The Big Switch’ campaign, which aims to secure consumers a better energy deal.
While some energy tariffs fell by around 5% at the start of this year, energy prices have been rising above the rate of inflation over the last year. Due to fluctuations in the wholesale price of gas and electricity, companies have been forced to pass on rises to their customers.
The high rises in gas and electricity prices have been criticised by many. They are a big factor in the current high rate of inflation. Some have suggested that the price rises have been avoidable and amount to profiteering by the energy companies.
The regulating body of the energy market, Ofgem, previously launched an investigation into last year’s price rises after concerns that they had downplayed profits to justify bigger price hikes.
Recently they have called for the companies to improve their pricing schemes or face a cap.
Consumer apathy has been considered a problem in the energy market. Many people generally avoid switching energy suppliers, impacting competition and making it easier for the companies to raise prices. It is estimated that only 5 million people switch suppliers every year and this low level accounts for around £4 billion of profit every year.
The Big Switch campaign hopes to address this and introduce a new way of purchasing energy which will force down prices.
Over 75,000 people have already signed up since the launch of the campaign. It works in a similar way to other collective purchasing schemes, such as Groupon. Similar schemes have also proven to be successful in other countries in the EU, such as the Netherlands.
Which? will collate all details from those who sign up to The Big Switch campaign by the end of March. They will ask energy suppliers to bid on the whole group. The energy company that offers the lowest energy price will have their offer passed on to the customers who signed up.
It is likely that the new deal will be for a fixed term, but those customers who joined the campaign will not be obliged to switch energy supplier. It is open to everyone in the country and if the campaign is successful, Which? may run a similar campaign next year.
The campaign has received support from across the political spectrum. Ed Davey, the energy secretary, is calling for more schemes similar to this to help improve competition in the industry and lower consumer costs. Caroline Flint, from the Labour Party, indicated that the scheme was a ‘trailblazing way to help bring down soaring bills.’
Richard Lloyd from Which? argued that government and those responsible for regulating the energy market had ‘dragged their feet for far too long’ over the issue of price rises. He suggested that people were angry and that this was a way to help them fight back.
Mr Lloyd added: “It’s time for people power and what we are doing will hopefully help those struggling to pay their energy bills at a time when unemployment is rising and many household finances are under attack from steep tax increases and paltry pay awards.”