Has Sanity Returned To The UK Energy Market?

Has Sanity Returned To The UK Energy Market?

While nowhere near previous levels, consumers are beginning to switch power suppliers again. But is the energy industry ready for a return to competitiveness?

It’s been a crazy year for the UK energy industry. Thanks to a perfect storm of factors, we’ve seen all-time high prices, blackout scares and unprecedented government intervention. During this time, competition between energy suppliers for consumer business all but disappeared. Even price comparison websites that get paid for delivering switchers encouraged their users to stay where they were. Everyone was paying the fixed rate set by the government, so there was little point in switching anyway.

Now, however, things are beginning to change. Switching suppliers is back, albeit not at pre-crisis levels yet. In this article, we’ll examine why switching stopped and where we are currently. We’ll also look at a worrying development in the energy industry that could make things difficult for switchers. Let’s get started.

The return of switching

In 2022, there was little to gain by energy customers switching suppliers. Prices were at an all-time high across the board, wherever you were. At the same time, many smaller suppliers had gone bust or been acquired by more prominent players, so the risk of switching was higher. Then, the government introduced the Energy Price Guarantee (EPG), which protected consumers from further rises by setting a maximum unit price for energy.

The EPG remains in place, but wholesale energy prices are falling, meaning energy prices have leeway to tempt new customers to switch. And it’s working:

  • 175,000 switched electrical suppliers in March 2023, up 62% from March 2022
  • 64% of switches were between larger suppliers
  • 18% were from larger suppliers to smaller or mid-tier providers

While this increase is from an extremely low base and we’re still well below the numbers of switchers before the energy crisis, this is an encouraging sign that things are starting to return to normal.

Welcome news

It’s great news that we’re on the journey to business as usual, as slow as it may be right now. Everyone benefits when switching between suppliers is a common occurrence.

Consumers benefit most from switching because they can take advantage of (hopefully) lower prices and better service from their new supplier. At the same time, suppliers make larger profits when they win more new customers. While shareholders certainly benefit from this, increased customer levels also encourage suppliers to invest in upgrading their network and delivering a better service. 

When the Energy Price Guarantee eventually goes (currently June 2023, although the government may well extend the deadline), suppliers will need to be agile with how they do business in the new environment. No one wants to see another group of suppliers going out of business as we did at the start of the energy crisis. On the other hand, suppliers need to be able to offer a quick and easy switching experience to their new customers.

Switching issues

However, there’s a problem looming on the horizon.

The Energy Switch Guarantee (ESG) is a scheme set up by Energy UK, the trade body for the energy industry in the UK. It aims to ensure that suppliers provide a fast and easy experience for consumers if they switch, with deadlines laid down for each task, including:

  • Switching complete (within 21 days)
  • Final bill from original supplier (within 6 weeks)
  • Credit refund on any outstanding balance (within 14 days)

Every quarter, Energy UK publishes the results, showing every participant in the scheme and how they performed with their switches expressed as a percentage. This transparency is supposed to encourage suppliers to improve their switching operations and resolve issues faster.

However, it’s notable that while most large energy suppliers participate in the ESG scheme, there are some that do not. What’s more, companies that are missing from the scheme won’t explain why, preferring to avoid public scrutiny of their switching experience. Is it because they consistently miss targets and can’t improve their results? Or perhaps it’s because they would prefer to run a reduced operation with longer switching times in a bid to reduce costs.

Whatever the reason, it’s clear that transparency drives higher standards, so it would be better if every supplier were part of the ESG scheme. Could negative publicity penalise suppliers that don’t participate in the form of fewer switchers? We will have to wait and see.

Raising switching levels and standards

It’s been a long hard twelve months (and more), so it’s great to see any sign that the UK energy sector is returning to business as usual. This includes seeing more customers switching suppliers in order to gain advantages, even if levels are still comparatively low at the moment. However, suppliers shouldn’t be able to return to normality on their terms only. At the same time, they shouldn’t be allowed to derail the journey back because they would prefer to cut costs than raise customer experience standards.

Switching is supposed to be easy, but customers won’t bother doing it if they find it a hassle. It is counterproductive to what’s supposed to be a fluid marketplace. We hope the UK energy industry can come together to help consumers, who have also had a challenging year.

Stay in touch with Meter Corp as we bring you all the latest developments in the UK power supply industry.

Leave a Reply

Your email address will not be published.