Making the switch – how much will really change?

Last week on 1 July, Ofgem confirmed that the designated Go-Live date for the Centralised Switching Service (CSS) would be 00:01AM on 18 July 2022, as was previously anticipated. The most significant impact of this will be the requirement on suppliers to ensure switches are completed within five working days, as opposed to the current 21 working days. This move toward faster and more reliable switching for both domestic and non-domestic customers has been in the making for several years now under the Switching Significant Code Review (SCR).

This SCR was launched back in February 2015, for which Ofgem has since undertaken a number of consultations concerning how to best meet its objectives, and has established a new industry code (the Retail Energy Code) to incorporate the new switching arrangements. Since 2019, when Ofgem outlined its full business case for the switching programme, the Data Communications Company (DCC) has been appointed to procure and operate the CSS in its early years and suppliers have been upgrading their systems and processes to meet the five day switching objective, and estimated the cost of the programme at £426mn. The main aim of the CSS is to improve the consumer experience of switching energy supplier, which the regulator considers to be a path toward greater engagement with the retail energy market.

A point of contention that arose in the consultations was that the faster switching programme is being introduced at a time where the market is extremely volatile. It was considered by some stakeholders that in the event of significant wholesale price changes, the new switching framework may not cope under high volumes of switches and cancellations. Consequently, some argued a phased introduction may be more suitable. Despite this, Ofgem has maintained that the CSS framework is robust and that the potential increased number of switches during this time should not impact on how fast they can be completed.

However, while Ofgem also considers the new system will increase the competitive incentive for suppliers, the Go-Live date is coming at a time when high prices are having a severely limiting effect on switching rates, and interventions from the regulator aimed at addressing wholesale volatility (such as the Market Stabilisation Charge and the ban on acquisition-only tariffs) will reduce switching rates when commodity costs fall. The full benefits for consumers and competition of faster switching will not be felt next Monday, but further down the line when the market has stabilised.

Alongside the main change of reducing the timeframe of a switch to five days, other changes from Ofgem’s decision include rules on how suppliers should act in the event of a domestic customer cancelling their contract with a new supplier, and a modified list of circumstances that exempt a supplier from switching within the timeframe – including that a supplier can only carry out a switch within the five days if the customer explicitly agrees to it. There are also changes to how customer transfer blocking can occur, with the new Annulment or Switch Withdrawal processes replacing the current condition allowing cancellation of a switch initiated in error. There are some minor differences for electricity and gas suppliers in the changes, for example gas suppliers should note that any objections used in relation to switches raised under the UNC should now be treated as if they were raised under the REC. This is to reflect the transition from gas switching being a shipper-led process to a supplier-led process. Electricity suppliers are also no longer able to cancel a switch away from them for a meter if there are related meter points that are not included in the proposed switch.

Against a different market backdrop, the new and improved switching experience may have been more immediately impactful, however under current market conditions, it seems like a small move forward against the number of other challenges both suppliers and consumers are facing. Benefits will come over the longer term, with Ofgem also suggesting it may seek to reduce these timescales even further in the future after the initial transition has taken place, expecting domestic switches to occur next working day, and non-domestic switches within two.

Our services track key regulatory and policy developments, including around implementation of the faster switching service. If you have any enquiries about our services, please get in touch at regulation@cornwall-insight.com

Related thinking

Home supply and services

Highlights from our Energy Supplier Compliance webinar

As part of our Energy supplier compliance portal service, we run a webinar every 6 months which looks at key updates.    Our latest webinar looked back at the decisions made under Ofgem’s financial resilience plan. This included strengthening milestone assessments and introducing additional reporting requirements. It also decided on the short-term interventions...

Low carbon generation

Energy System Reform: Ofgem shares plans for Britain’s energy system

Against the backdrop of record high and volatile energy prices, Ofgem set out on 8 July its view on key aspects of the GB energy system where it considers significant reform is required to deliver a resilient, low cost, low carbon energy sector. Recent developments in the energy market, such...

Regulation and policy

The changing compliance landscape

In recent months, Ofgem has been increasing its engagement with suppliers to ensure compliance with their supply licences and to deliver more resilient business models. This has been evidenced through a number of actions, such as stress testing suppliers and introducing additional reporting requirements, under the scope of the regulator’s...

Energy storage and flexibility

National Grid ESO’s ‘early view’ winter report 2022/23

We have published an alert on National Grid Electricity System Operator's Winter 2022/23 early view report.  The ESO considers that it is important for industry to be provided with a rough understanding of the situation to come, through the early view report. It is operating under the assumption that the peak...

Commercial and market outlook

Two thirds of energy industry professionals think the market needs to be drastically reformed

A survey conducted of over one hundred leading energy market professionals from across the investment and advisory community, by Cornwall Insight, from the attendees of its Financing Net Zero forum, has shown nearly two thirds (63%) of people working in the energy industry1 believe the UK market needs to be...

Regulation and policy

Hanging in the balance – Ofgem’s latest proposals on protecting customer credit and RO payments

Ofgem has published a consultation setting out its latest proposal to deal with the risks – and costs – of supplier failure. This forms part of a broader piece of work on increasing the financial resilience of suppliers and curbing the costs passed on to all customers after a supplier...

Energy storage and flexibility

Network charging – what’s been going on and why should I care?

Across Great Britain there are ~810,000km of wires and underground cables that make up our electricity network. Split between the higher voltage, transmission system and the lower voltage distribution system, these lines and cables are responsible for transporting electrons up and down the country to provide consumers with the necessary...

Home supply and services

Tapestry: Ofgem’s new quarterly Default Tariff Cap

This article was extracted from our Energy Spectrum publication published 23 May 2022. Energy Spectrum is a weekly news service which keeps you up-to-date with developments in the market. For the full article please contact Jack Hunt at j.hunt@cornwall-insight.com The announcement by Ofgem of its minded-to decision in respect of...