Last updated: July 2013
Community energy buying
Consumer power is now resulting in big savings on fuel bills.
The cost of keeping your house warm may be going through the roof, but the good news is that by acting co-operatively, people are now forcing the big energy companies to offer them substantial savings on their energy bills. Collective buying, as it’s known, works by large numbers of people using their purchasing power to negotiate discounts from their energy suppliers. With average annual energy bills now topping £1,300, it’s already bearing fruit for those involved.
Which? and 38 Degrees
One of the first and biggest examples of collective buying took place last year in an initiative called the Big Switch which was co-ordinated by the online campaign group 38 Degrees and the consumer group Which?
“The project started when 38 Degrees members first voted to challenge increasing gas and electricity bills,” explains Becky Jarvis from 38 Degrees, which now has one million online members. “Thousands of us discussed what we should do and together we came up with the idea of using our power as customers to try to negotiate cheaper energy tariffs by effectively bulk-buying on behalf of the group.”
Nearly 300,000 people registered for the UK’s first collective switching initiative with a total of five energy suppliers competing to deliver the cheapest combined tariff for gas and electricity with Co-operative Energy emerging victorious. “On average households saved up to £183 if they paid they bills by cash or cheque,” says Jarvis.
Some people though expressed concern that the Big Switch failed to target the very people who would benefit most from lower energy bills. “People who switch energy providers and who get the best deals are usually the young and upwardly mobile, whilst it’s the older and poorer who don’t switch that get overcharged,” says Reg Platt from the think-tank the IPPR. “Collective switching schemes need to focus on getting bills down for non-switchers.”
These non-switchers are exactly the target group for the PeoplesPower, a collective switching scheme which is operating on a far more modest scale than the Big Switch. “We want to reach those people who’ve never switched energy suppliers before to join together to save money,” says Mike Shamash, the director at the PeoplesPower. Over 5,000 people signed up to the latest switch this April which has target savings of around £170 per household and includes a tariff for renewable energy.
The potential for collective-buying to help the many thousands of people in the UK who now suffer from fuel-poverty has attracted the attention of local authorities who are now running their own switching schemes. “There are more than 200,000 households in Manchester who are in fuel poverty and struggle to heat their homes in winter,” says Sir Richard Leese, leader of Manchester City Council which is throwing its municipal weight behind the scheme. Over 90 councils across England organised switching schemes this spring with 160,000 people signing up.
Ed Mayo, Secretary General of Co-operative’s UK – the trade body of co-ops across the UK, is a big supporter of collective switching: “With the energy market being so deeply distorted against ordinary consumers, organising consumers together to pool their collective buying power has got to be a good thing.”
However whilst Which? recognise the success of their Big Switch, they are still demanding more Government intervention in the energy market to help the 4.5 million UK households in fuel poverty: “The current Government proposals for reforming the energy market don’t go far enough and won’t encourage the vast majority of people who have never moved energy supplier to switch or increase competition in the broken energy market,” says a Which? spokesperson.
“We want the Government to introduce single unit prices for energy tariffs so people can easily compare prices and spot the best deal for them at a glance. This would inject much needed competition into the market and finally increase the pressure on energy companies to keep their prices as low as possible for everyone.”