Collective energy purchasing

How do collective energy switches work?

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Collective purchasing can help secure a cheap energy deal. Find out how it works

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There are hundreds of energy tariffs on the market, from expensive standard variable rate (default) tariffs to cheaper fixed-rate deals, where the price per unit of energy used is locked in for the duration of the deal – usually 12 months.

Most of these tariffs are ‘off the shelf’ – they are created by the supplier and sold through comparison sites and the firm’s own marketing efforts.

But collective tariffs are different – and they can offer extremely competitive prices.

What is a collective energy deal?

The gas and electricity provided under a collective switch is exactly the same as under any other tariff, and comes out of the same pipes and wires. But the price charged is the result of a negotiation between the energy company and another party – usually a comparison site such as MoneySuperMarket.

A collective switch normally arises from a bidding process. The price comparison site will ask as many energy companies as are interested to come up with an attractive tariff, on the promise that it will help secure a high volume of sales for that particular deal.

The winning bid will be the one which offers the best terms – that primarily means price, but the various energy companies’ track record on customer service will also be considered.

The tariff will be exclusive to the site’s customers, who will be invited to switch via emails and promotion material on the website itself.

In addition to comparison sites, collective switching offers are often made by housing associations, local authorities or charities. Ofgem, the energy market regulator, has also organised a series of collective switches, indicating that this marketing approach has official endorsement.

How do you participate in a collective switch?

Collective switches are only available to members of a group or community. This might be people who have signed up to receive a comparison site’s marketing emails, or it might be members of a housing association.

In some cases, you might be invited to register your interest by providing contact details and information about your current energy usage. You’ll be given a deadline when you need to register by, and if you miss it, you won’t be eligible for the deal.

Ofgem’s rules say you must be registered before the switch begins.

Note that, even if you sign up for a switch or already belong to a group that is eligible by default for a collective deal, you are under no obligation to switch. In fact, it is often the case that the collective switch is not the best deal on the market, so you may decide not to switch at all, or to switch to a different tariff.

Can I switch before my current energy deal is up?

If you decide to switch but are only partway through a fixed-rate deal, you should check to see if there are any exit fees attaching to your current tariff. These can be as much as £60 on a dual-fuel gas and electricity tariff, which can eat into any potential savings you might secure on the collective switch.

When MoneySuperMarket offers a collective switch, eligible customers are still required to complete an energy quotation, which means providing details of where they live, their property and who lives there, and their energy usage.

The results of the quotation will show other tariffs alongside the collective switch, so they can see whether or not it is competitive. This is also an opportunity to scrutinise the details of the scheme and any requirements it may have, such as managing the account online, paying monthly by direct debit and switching to a smart meter.

If you are in receipt of the Warm Home Discount from your current supplier you should check it will still be available once you have switched under the collective arrangement.

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