Energy switching should take 24 hours, Government says

Energy Secretary Ed Davey announced energy firms will be told they must make switching suppliers faster for consumers, without increasing consumer bills (join our free Cheap Energy Club to find the best tariff for you).

Davey will be meeting E.on, Scottish Power, Scottish and Southern Energy (SSE), First Utility, Ovo, Spark, Good Energy, Co-op and other interested suppliers over the next few weeks about how to speed up switches.

He added the Government is prepared to take action to compel providers who drag their heels into making the process quicker. But Davey admitted the change won't come overnight.

Energy companies will also face annual reviews of their pricing and profits from regulator Ofgem, which will study competition and the way firms deal with customers, while the Government will look into making manipulating wholesale prices a criminal offence.

Consumers need to be put in control

Davey said: "The energy industry needs to change to put consumers in control. That means making it easy for people to change supplier to save money, it means regular market assessments to check their behaviour, and it means tougher penalties for market manipulation and putting an end to opaque finances. 

"We want to push energy companies to make switching quicker and easier – because consumer action can force suppliers to change their ways. Bills are being redesigned to give people the information they need to make switching easy – and we are taking direct action to bring first hand help to those vulnerable people who find switching difficult.

"Energy companies need to know that any wrongdoing will be uncovered and dealt with. That's why the regulators are going to carry out annual competition reviews, to make sure the energy market is operating properly. We are going to consult on increasing the sanctions for manipulation of the energy markets, so that they carry criminal penalties for the first time."

Consider locking into a cheap fix now

MoneySavingExpert.com creator, Martin Lewis, says: "If Ed Davey can actually deliver 24-hour switching, something many of us have been calling for a long time, it would finally be something politicians have done that actually impacts the energy market.

"It can take two months or more from applying to moving over. Many people are flogged tariffs in supermarkets and shopping centres by pushy salespeople telling them it'll be cheap. But by the time they're actually on the new tariff, the price has been hiked.

"Speeding up the switching progress is an important step to preventing this, but we also need rules that prevent energy companies from hiking prices for the first six months for those that have just switched – this would give people a real consistency.

"I'm less convinced the various competition enquiries will make any real difference, though. We've already got energy industry report fatigue stretching back years. This is an industry with its own toothless tiger regulator, Ofgem. But I hope to be proved wrong.

"Yet none of this will help the bill shock this winter. We're still seeing massive rises. To beat that people have to take action. Ignore protestations by politicians to 'switch', you'll just end up moving to a company that hasn't yet announced hikes, but soon will.

"Instead, do a comparison to see if you can save on a cheap fix, which locks you into prices. This logic still applies, even though the PM is promising to reduce bills by getting rid of some of the green levies. He's likely to cut bills by £60-odd, far less than just the current price hike. Yet it does mean it's even more important to check your fix has no early exit penalties so you're not locked in if it all changes."

Further energy reforms

It was also announced that Energy and Climate Change Minister Greg Barker will meet energy suppliers to discuss issues around direct debits, including the level of credit balances that energy companies hold.

Energy companies should also be more open about how they treat credit balances in consumers' accounts, the Government said, making every effort to return money to customers who close accounts, or ringfencing the cash to help vulnerable customers.

Ofgem will also carry out a detailed assessment of energy suppliers' financial reporting practices and set out any steps to improve transparency, so that consumers can see where their money is going. This assessment will also report in Spring 2014.

Additional reporting by the Press Association.