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New stats show the energy market remains uncompetitive | The Big Deal

The Big Six claim that more and more people are switching their energy supplier and that market competition is increasing, but 2013 was the second-lowest year on record for switching.

Just yesterday, Sam Laidlaw, Chief Executive of Centrica - the multinational firm which owns British Gas - said during an interview on the Today Programme "there is no doubt that switching is actually on the increase." Energy UK, the lobbying organisation for the British energy industry, claimed earlier this month that "it is now quicker than ever to change supplier; more and more people are switching either energy tariff or supplier."


It's no surprise that the energy companies want to give the impression that more people are switching. Switching rates are a key measurement for checking how competitive the market is. A high switching rate means that suppliers have to compete amongst themselves to drive down prices, which benefits consumers.


Switching records go back to 2003 when there were 7.26 million "change of supplier events" - an instance of a household switching their gas or electricity supplier. This rose as high as 9.58 million in 2008, when the market reached peak competitiveness. Since then, however the switching rate has plummeted. The worst year on record was 2012, which saw a measly 5.62 million switches.


But despite this historically low benchmark, new figures from the Department for Energy and Climate Change, released yesterday, reveal that 2013 saw only 5.65 million total switches - the second-lowest annual total on record. This is a miniscule 0.3% increase on the record low of the year before, and almost 4 million fewer switches than in 2008.


Why the decline in switching?


The energy switching rate has declined because the public has become hugely disillusioned with the energy industry as a whole. Prices keep rising every year, and no one trusts the energy companies to get them a good deal. Our own polling, conducted by Populus, found that four out of five think that the energy market is 'broken' and three quarters think energy companies act like a 'cartel'. In this context, it just doesn't make sense to switch.


If you switch your energy provider in order to get a better deal, and then your new supplier raises their prices - along with every other major supplier - it's only natural to become disenchanted with the switching process.


Ofgem polling has found that the number of people switching four times or more has been rising for the past several years (17% of those who switched last year). It's this hard core of market-savvy consumers who are doing much of the switching - for most people it's too much of a hassle and they don't trust the suppliers or price comparison sites enough to think that switching will help.


What's the solution?


We've seen the proliferation of energy switching websites, which allow people to compare energy prices from a confusing array of tariffs, in the same period in which the actual switching rate has plummeted. This suggests that traditional websites just don't work.


The Big Deal has an innovative strategy for injecting genuine competition into the market. By gathering a large amount of people together, we can harness their collective buying power to beat the Big Six and deliver them cheaper energy. More people means lower bills.

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