Switching programme should not lose sight of improving reliability

Faster and more reliable switching has been on Ofgem’s agenda for some time. It is intended to potentially encourage customers to change supplier in bigger numbers. Ofgem are progressing a programme of reforms to progress reliable next day switching for domestic consumers by summer 2021.

However, while much of the attention has been focused on the ‘faster’ element of the switching programme, the ‘more reliable’ component is where the majority of the benefits are expected to accrue.

The chart below is adapted from the programme’s impact assessment; it shows the reliability benefits overshadow the others outlined in the programme at £261mn in net present value terms compared to £67mn for time-saving benefits.

The chart shows the reliability benefits overshadow the others outlined

Steven Britton,Senior Analyst at Cornwall Insight, said:

“Ofgem – and suppliers – should focus on realising the benefits from the reliability of switching, not just from the speed at which it will take place.

“There are likely to be materially higher benefits from switching reliability when compared to switching with speed from this programme.  The difference arises because ‘faster’ benefits only consist of the customer not needing to be so involved with their switch, and engaged customers being able to time switches to avoid paying default tariff rates. Increasing reliability, on the other hand, should lead to fewer erroneous, failed or delayed switches.

“Most customers rarely switch, and Ofgem believes part of this is concern that something is likely to go wrong when they attempt to do so. Improvements in reliability could go to some way to remedy this through increasing confidence in the process, with Ofgem predicting it will lead “several hundred thousand’ extra successful switches annually.

“The reliability element also ties in with Ofgem’s recent work on enforcing guaranteed standards on suppliers concerning switching, requiring them to compensate customers when things go wrong. This is intended to be another incentive to improve the reliability of switching.

“Greater reliability will be driven by the new address data service that will be part of the Central Switching Service (CSS). This will help match industry and customer data to clear up discrepancies and be continuously communicated with the two-meter point databases.”