Energy Switching: Can it be done in just one day?

However, there are significant practicalities that make this optimal outcome an unlikely one. It is perhaps instructive to look at how quickly the largest electricity supplies in the UK, which are metered on a half hourly basis, can change supplier. The answer to this would be plus or minus 5 working days but there are a couple of important differences between the ideal 5 day industrial site switch and your standard domestic household switch.

Firstly if you are big enough and the supplier is desperate enough for your business they will break with standard process to pick you up as a client – no domestic household, except perhaps 10 Downing Street or Buckingham Palace, could engender that level of hurry up in an energy supplier.

In the commercial market the chances are you have been credit checked in advance of being given a price offer capable of acceptance. Credit checking takes time – and no domestic household is credit checked in advance of a switch occurring. The commercial market operates on fixed price contracts with definitive start and end dates. Suppliers therefore have an absolute target date that they need to hit or else be required to pay compensation, and so they are unable to kick the can down the road of inefficiency without punitive consequences.

The domestic market has not embraced new suppliers and so it is the old suppliers who continue to set the glacial pace!

meter readingThe larger end of the industrial and commercial market has embraced smaller suppliers to such an extent that it is these suppliers and their corresponding price points and efficiencies that help determine the agenda and the pace of switching. The large end of the market has a half hourly meter that is independently read with information on consumption available to all parties remotely.

This negates the need to obtain opening and closing reads from the consumer or a man in a van. Clearly this information is needed to determine the accuracy of consumption at the point of supplier changeover so that the consumer is billed correctly and the right supplier gets paid for the right units.

Smart metering will solve this problem but right now part of the switching delay is in part due to the time it takes for consumers or meter readers to read their meters.

In the domestic market you have a cooling off period when you can get out of the contract you have signed up to. That cooling off period is a minimum of 7 days. In the large end commercial market it is Caveat Emptor – once your name is on the contract you are signed up – no get out. Let us assume that First Utility succeeds in its quest to get the switching time shortened and that Ed Davey gets some kind of legislation or regulation in place ensuring compliance backed up by a big stick for failure. How fast is it actually reasonable? If the process starts when you compare energy prices and decide to switch then we can make some assumptions and come up with a reasonable time frame for switching. The cooling off period takes us to online switch (OS) D+7. We build in the 5 days that the large market can get now , and we are at OS D+12. Taking 2 days to run and process the credit check, and a week for the meter reading window (with an obligation on the consumer to read their meter) and we find ourselves at OS D+ 21.

It should, therefore, be reasonable to switch domestic electricity supplier in 21 days under the current metering arrangements or 14 days in the Smart world (assuming this process runs in parallel to the others). To get to 7 days (like that required of banks) would require the suppliers to begin the process of switching including the credit check immediately and run the risk of someone changing their mind within the cool-off period and these costs having been incurred for no revenue. This risk will be built into the price somewhere but it may just be worth paying to get to a point where switching in a week is viable. Switching in one day is the stuff of newspaper headlines not the stuff of energy policy. 3 weeks on the other hand is a policy with legs.

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*This figure is an annual saving, based on a dual fuel energy switch on the 19/07/2013, from a British Standard tariff (payment: cash / cheque) and a EDF Standard tariff (payment: cash / cheque) to a dual fuel online variable tariff (payment: Direct Debit). We used a London postcode and the average UK consumptions: 16,500 kWh/year for gas and 3,300 kWh/year for electricity.