Making the switch – how much will really change?

Last week on 1 July, Ofgem confirmed that the designated Go-Live date for the Centralised Switching Service (CSS) would be 00:01AM on 18 July 2022, as was previously anticipated. The most significant impact of this will be the requirement on suppliers to ensure switches are completed within five working days, as opposed to the current 21 working days. This move toward faster and more reliable switching for both domestic and non-domestic customers has been in the making for several years now under the Switching Significant Code Review (SCR).

This SCR was launched back in February 2015, for which Ofgem has since undertaken a number of consultations concerning how to best meet its objectives, and has established a new industry code (the Retail Energy Code) to incorporate the new switching arrangements. Since 2019, when Ofgem outlined its full business case for the switching programme, the Data Communications Company (DCC) has been appointed to procure and operate the CSS in its early years and suppliers have been upgrading their systems and processes to meet the five day switching objective, and estimated the cost of the programme at £426mn. The main aim of the CSS is to improve the consumer experience of switching energy supplier, which the regulator considers to be a path toward greater engagement with the retail energy market.

A point of contention that arose in the consultations was that the faster switching programme is being introduced at a time where the market is extremely volatile. It was considered by some stakeholders that in the event of significant wholesale price changes, the new switching framework may not cope under high volumes of switches and cancellations. Consequently, some argued a phased introduction may be more suitable. Despite this, Ofgem has maintained that the CSS framework is robust and that the potential increased number of switches during this time should not impact on how fast they can be completed.

However, while Ofgem also considers the new system will increase the competitive incentive for suppliers, the Go-Live date is coming at a time when high prices are having a severely limiting effect on switching rates, and interventions from the regulator aimed at addressing wholesale volatility (such as the Market Stabilisation Charge and the ban on acquisition-only tariffs) will reduce switching rates when commodity costs fall. The full benefits for consumers and competition of faster switching will not be felt next Monday, but further down the line when the market has stabilised.

Alongside the main change of reducing the timeframe of a switch to five days, other changes from Ofgem’s decision include rules on how suppliers should act in the event of a domestic customer cancelling their contract with a new supplier, and a modified list of circumstances that exempt a supplier from switching within the timeframe – including that a supplier can only carry out a switch within the five days if the customer explicitly agrees to it. There are also changes to how customer transfer blocking can occur, with the new Annulment or Switch Withdrawal processes replacing the current condition allowing cancellation of a switch initiated in error. There are some minor differences for electricity and gas suppliers in the changes, for example gas suppliers should note that any objections used in relation to switches raised under the UNC should now be treated as if they were raised under the REC. This is to reflect the transition from gas switching being a shipper-led process to a supplier-led process. Electricity suppliers are also no longer able to cancel a switch away from them for a meter if there are related meter points that are not included in the proposed switch.

Against a different market backdrop, the new and improved switching experience may have been more immediately impactful, however under current market conditions, it seems like a small move forward against the number of other challenges both suppliers and consumers are facing. Benefits will come over the longer term, with Ofgem also suggesting it may seek to reduce these timescales even further in the future after the initial transition has taken place, expecting domestic switches to occur next working day, and non-domestic switches within two.

Our services track key regulatory and policy developments, including around implementation of the faster switching service. If you have any enquiries about our services, please get in touch at regulation@cornwall-insight.com

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