A number of auto-switching services could be at ‘real risk’ in the coming months as big energy suppliers withdraw commission, according to an industry insider.
In recent years, a number of auto-switching services have been set-up, essentially allowing households to be signed-up and switched when a better tariff comes along with minimum fuss – we recently rounded-up a number of them and compared their offerings.
But Morgan Young, head of growth at Switchd – one of the auto-switching firms – warns: ‘The Big Six rely on their size and customer complacency to keep hold of their monopoly and automatic switchers represent the biggest threat they’ve faced in a very long time.
‘By refusing to pay out to these switchers, they are essentially starving them of the revenue they need to survive.’
It has been claimed some energy suppliers are stopping commission from auto-switching site
Switchd said some large energy suppliers are refusing to pay commission to automated energy switching services.
This is because they fear customers will be switched away from them as soon as a cheaper tariff becomes available.
Many auto-switching services powered by commission from the energy companies that they switch customers to.
Switchd claims the decision to stop paying commission reveals how scared the Big Six are of the auto-switching movement.
Auto-switching services compare deals and, with permission, start the switching process for the customer.
A switch is only made if a saving of over £50 a year can be made – after taking into account any exit penalties for leaving a deal early.
One reason auto-switching sites are becoming more popular is because they help customers find the best possible tariffs for them.
It also helps keep consumers stay off standard variable tariffs – which can be far more costly than fixed tariffs – by reminding them when their contracts are coming to an end.
Despite not paying commission to auto-switching sites, many suppliers are still paying third parties, for example, comparison websites, who list all available tariffs.
Auto-switching can help people save money by finding them the best deals on the market
Switchd confirmed that Scottish Power and EDF are among those now not paying commission to auto-switchers for tariffs that they would be paying out to comparison sites for – and others could follow suit.
This is despite the fact the two suppliers previously paid out commission to auto-switching sites.
Switchd believe the reason suppliers pay commission to comparison sites, whilst not paying auto-switching services, is due to the fact many people forget to switch provider or tariff after their initial contract has come to an end.
Therefore, the supplier can likely gain a long term customer for a small cost.
However, if they paid commission on auto-switching services, they would likely switch that person to a different supplier when their contract ends and the supplier will lose a customer.
The commission paid is based on what commercial agreement the suppliers may, or may not, have with each service.
This is Money contacted the Big Six firms to see what they have said about taking away commission.
An EDF spokesperson said: ‘We have contracts with price comparison websites (PCWs) which allow them to sell our tariffs and as part of this we pay them commission.
‘We have never had a direct contract with an auto-switching site however, we will continue to monitor them as a potential sales channel for the future.
‘We became aware that some PCWs were allowing auto-switching sites to sell our tariffs via their platforms. We have since asked them to stop this.’
SSE declined to comment as it said the arrangement it had with auto-switching sites were ‘commercially sensitive’. Npower and Eon also said they wouldn’t be commenting on the allegations.
British Gas reiterated its tariffs are not sold on any auto-switching sites and so there is no commission to be paid.
Switchd said Scottish Power & EDF don’t pay commission to auto-switching websites anymore
Scottish Power have not yet responded for comment.
Young said: ‘We have never relied on commission from energy companies, because it just doesn’t make sense.
‘Their interests aren’t aligned with ours: they want to keep their customers around long enough to lump them with a SVT, and our whole business model is about getting people a better deal.’
Switchd added it believes auto-switching services are relatively safe for the moment as the Big Six rarely offer the best deal on the market but it is likely that smaller energy suppliers will follow suit.
This is not the first time this issue has been brought to the forefront as several providers were called out last year for unreasonably blocking automatic switching.
Both Switchd and Flipper complained to Ofgem about the decision of First Utility (now Shell Energy), OneSelect and Bulb, to stop hundreds of customers being switched either to or from them because the auto-switching services instigated the change.
In one such situation, Flipper, the first auto-switching site, said it was prevented from switching 369 members to OneSelect midway through the process, forcing it to find an alternative deal or leave people with their existing supplier.
The regulator ruled in favour of the services and ordered the three suppliers to accept transfers proposed by Flipper, Switchd and other sites offering automated energy switching.
An Ofgem spokesperson said: ‘Third parties that provide automatic switching services make it easier for consumers to continuously get better deals without having to make the switch themselves.
‘This helps to open up a more competitive market. We have made it clear that suppliers need to work with these services.
‘Suppliers and switching services need to work together to ensure that switches made through them are processed properly and that a high level of customer service is delivered.’
Customers are encouraged to use comparison websites to find if they could switch to a cheaper tariff and save themselves potentially hundreds of pounds a year.
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