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Chart of the Week

2019

Faster switching or more reliable switching?

Steven Britton Senior Analyst

For years Ofgem has sought to make switching faster and more reliable on the basis that doing so should encourage customers to change supplier. Its programme of reforms in this area are in an advanced state, working towards reliable next day switching by summer 2021 for domestic customers. The “faster” element of the switching programme has received most of the attention, but actually the “more reliable” element is where the bigger benefits are expected. As Figure 1 shows, adapted from the programme’s impact assessment, it is the reliability benefits that predominate. These run to over £261mn in net present value terms for the chosen Reform Package 2a, while the time saving benefits come in at around £67mn. This was calculated over 15 years. This disparity is huge. “Faster” benefits only really consist of customers not needing to be so involved with their switch, and engaged customers being able to time switches to avoid paying default tariff rates. Greater reliability, on the other hand, should lead to fewer erroneous, failed or delayed switches. Together, these benefits are thought to increase consumer confidence in switching and lead to “several hundred thousand” extra successful switches annually. This also ties into Ofgem’s recent work on enforcing guaranteed standards on suppliers with regard to switching, requiring them to compensate customers when things go wrong. This is intended to be another incentive to improve the reliability of switching. The benefit of greater reliability should 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 constantly communicated with the two meter point databases. Currently the data migration plan is still in “Stage Zero”, during which time industry participants have to cleanse their data in readiness for it being handed to the CSS address data service. It will be important for Ofgem – and suppliers – to bear in mind during this programme that the most important thing to focus on will be ...

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