Utility Week

UTILITY WEEK | 27TH MARCH - 2ND APRIL 2020 | 27 Customers continued overleaf A s a nation obsessed with getting a good deal, it is no surprise that more consumers than ever regu- larly change energy providers to chase the best tari s and manage their energy costs. Despite a booming switching market, the process remains relatively complex for consumers and problematic and time-consuming for suppliers as they are forced to resolve MPAN (Meter Point Administration Number) errors, address incorrect meter readings and the dark art that is calculating • nal billing information. The combination of mounting consumer frustration and advances in technology have spawned the auto- switching market, and since 2016 a host of services including EnergyCheck, Switchcra† , Flipper, Switchd and WeFlip have emerged. Autoswitchers monitor the market to compare tari s and automatically switch cus- tomers when their contract ends, with their permission, to the cheapest deals. It helps keep consumers stay o standard variable tari s, which can be far more costly than • xed tari s. However, the process doesn't bring unbridled bene• ts either. Concerns about autoswitch- ing services were highlighted by a report from Citizens Advice last month (see also page 29), which drew atten- tion to a lack of regulation of third party intermediaries (TPIs) in the energy retail market. But more of that later. The business model for autoswitching sites is either based on a monthly subscription paid by customers to the switching company on the understanding that they will save hundreds of pounds on their utility bills, or on a referral fee or commission paid by the utility provider to the switching company. "Autoswitching sets out to address the issue of loyal customers being penalised with creeping price increases, while new customers bene• t from better rates as an incentive to sign up, with the result that elderly and less internet-savvy customers tend to pay more," says Bill Harmer SVP EMEA at data management and analytics company Information Builders. The reality is that even those consumers who do engage with price comparison websites (PCWs) don't switch as o† en as they should because checking tari s every month and then switching yourself is a hassle, especially for a low saving. Michael Gutteridge, managing director of Bristol- based Flipper, says autoswitching has helped to increase repeat switching, and is also forcing PCWs to "up their game", with some launching their own autoswitching services and others introducing price monitoring/alert- ing functionality. "It has contributed to strong switch- ing volumes away from the big six over the past 12-18 months, which has led to the big suppliers either o ering improved tari s to try and win back or retain customers, or exit the market altogether. All of these are positives for consumers." Last year, 6.9 million people used a third-party ser- vice to compare or switch their energy supplier, accord- ing to Ofgem. Citizens Advice estimates that in that same period around 300,000 people used autoswitching ser- vices, although just-published customer numbers from WeFlip of 300,000 suggest the actual market • gure to be much higher. Zoe Harris, chief executive of WeFlip, believes 400,000 customers represents a more realistic number. As the country moves towards net zero and consum- ers increasingly turn to TPIs to help manage their energy use, Harris is bullish about the growth potential of the market. She tells Utility Week that the company is going a† er the 60 per cent of energy customers it believes are in the market for autoswitching services. David Lewis, an energy expert at PA Consulting, has a more cautious outlook on the market opportunity. "It's not clear who will sign up to autoswitching services. They may well end up being people who would have signed up to a new cheaper rate anyway. Autoswitching services will probably increase the frequency of switches for these customers. Autoswitching might also ensure that switching actually happens, rather than what hap- pens at the moment where someone looks at a new deal but then gets distracted by everyday life and never com- pletes the switch." Lewis predicts that mid-tier energy suppliers might be at more risk than the larger suppliers, bearing in mind that mid-tier customers are more engaged with the market and have already demonstrated a willingness to switch. "In contrast, the larger suppliers tend to have a much bigger proportion of sticky customers who are less likely to be swayed by a new switching service," he says. It is hard to see how autoswitching will impact the very sticky customers who don't really consider who their supplier is, let alone look at their bills, and don' look for a better option out there, Lewis says. The challenge for energy retailers is ensuring they keep an eye on the wholesale market prices, current and predicted usage, and competitors' tari s, in order to deliver ¡ exible tari s that attract new customers and retain existing customers who might be tempted to¢switch. Rumours are also rife that the autoswitching market has spooked energy retailers, nervous about the impact of autoswitching on their revenues and concerned it will result in a race to the bottom and unsustainable energy prices. "If autoswitching does push prices down, incum- bent suppliers will have to work harder," says Lewis. "They will need to look at what extra services they can provide or create a greater customer community. Cus- tomers who are tempted to switch are more engaged and more likely to be looking for services and extras." Flipper's Gutteridge agrees: "Autoswitching is abso- lutely not about driving a race to the bottom. It should be about wanting to move customers to a better deal, but one that is great value, not just 'the cheapest'. More 10 - 11 November 2020 The Utility of the Future is also the theme of Utility Week Live taking place at the NEC in Birmingham on 10 - 11 November. Visit•www.utilityweeklive.co.uk for more information. "It's not clear who will sign up to autoswitching services. They may well end up being people who would have signed up to a new cheaper rate anyway." DAVID LEWIS, PA CONSULTING "[Autoswitching] is a responsibility that warrants regulation by Ofgem to ensure customers, especially those in vulnerable circumstances, are protected and have appropriate recourse." Dan Alchin, deputy director (retail), Energy UK

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