What is 'collective purchasing'?
Millions of people could save money on their household bills by switching their energy supplier. The size of the savings varies, but a typical household could pocket about £200, according to the latest government figures.
But if you don't feel confident about shopping around, you might be interested in a collective purchase switching scheme.
The first collective scheme came onto the market in 2012, helped by some government funding and inspired by similar schemes already available on the Continent, notably the Netherlands.
The aim of collective switching is to harness the power of a combined group to reduce energy bills. Basically, a number of consumers comes together to negotiate a better deal on their gas and electricity through bulk buying.
How do Collective Switch schemes work?
There is no set model, but most collective switching schemes work along similar lines.
An 'organiser' (perhaps a local authority, a housing association, a charity or other community group) will negotiate a deal - for a gas and electricity tariff - with an energy supplier that will only be available for consumers who 'enter' the collective switch scheme. This tariff is often priced very competitively and in many cases may be the cheapest on the market at average usage levels.
Customers may be asked to register before the scheme starts or may be able to join and switch at the same time, depending on the way the scheme is structured.
If you are asked to register beforehand this can be by phone or online and you normally have to give your name, address and contact number, details of your current tariff and supplier, as well as your energy usage. There is not usually a fee for registration, but there will be a deadline. Shortly after you register, you will be contacted to advise you of the 'winning' tariff for the scheme and invited to switch.
You must decide by a certain date whether or not to proceed. You are under no obligation and should not be under any pressure. Many schemes will show you the view of all tariffs on the market alongside the collective scheme tariff and we recommend consumers look at this to ensure that you switch to the tariff that is best for you.
The terms of the deal should also be clearly set out. The tariff will be fixed (as required under collective switching rules) so you should be able to see for how long the fix applies, the payment method, and whether you have to manage your account online.
When you are weighing up the pros and cons of an offer, don't forget to take into account any termination fee on your current tariff. If your existing price plan is fixed, you might have to pay a penalty if you switch before the fix expires.
What are the advantages of a collective switch?
There are several advantages to collective switching schemes. They can, for example, give consumers the comfort that the 'organiser' has done the leg work to find a great tariff for them. There is also evidence to suggest that collective switching engages vulnerable consumers, who often miss out on savings by sticking with their existing supplier.
However, the offer available from a collective scheme is not necessarily the cheapest on the market. It might cost less than your existing tariff, but that's not the same thing.
If, for example, your energy consumption is either very high or very low, you might be better off searching for a more personalised tariff through a comparison website. Check to see if the collective scheme shows you a full results table when you do a quote. If it doesn't then make a separate comparison
If you looking at a scheme that requires you to register before you know the tariff, then remember the time it takes the organiser to negotiate the collective switch means you don't start saving straight away.You should also think twice about participating in a collective scheme if you receive the Warm Home Discount as it is not always available to collective switchers.
†10% of customers could save up to £670. MoneySuperMarket Data, May 2016