'Switching database' to allow rival energy firms to offer cheaper deals to those on costly standard tariffs

The competition watchdog has today unveiled details of how it plans to encourage households languishing on expensive standard variable energy tariffs to switch to much cheaper deals.

It comes on the same day as energy regulator Ofgem started publishing its own league table comparing the most expensive standard variable tariffs with the cheapest deals on the market, in a bid to prevent millions of households from overpaying (more on this below).

The Competition and Markets Authority (CMA) will force suppliers to write to customers who have been on their standard variable tariffs for three or more years, asking if they'd like to be added to a 'switching database' in which their details are shared with rival suppliers.

Once on the database you'll begin to receive personalised energy offers by post from different suppliers. It's hoped this will encourage more customers to switch suppliers and lock in better deals, potentially saving £100s a year.

You can tell your supplier how you want to be contacted, although offers have to come in writing, which means post, email or text message – never a phone call. The details of how this will work are still being decided, and the CMA wasn't yet able to tell us whether different types of contact would be on an "opt-in" or "opt-out" basis.

MoneySavingExpert.com founder Martin Lewis has previously raised concerns that some customers may feel like they're being "bombarded with what feels like spam" and so they may fail to take advantage of energy savings.

Customers will be free to ignore offers they receive and stay on the database, or opt out and have their details removed.

Although small-scale pilots of the scheme will begin next year, MoneySavingExpert understands it's unlikely to be brought in nationally until late 2017 or early 2018.

While a record number of people have switched energy providers in 2016, Ofgem revealed last month that 66% of all households are still on standard variable tariffs. And despite British Gas, SSE and E.on all freezing their standard prices over the winter, such tariffs remain among the most expensive on the market.

Customers who haven't locked in to a cheap fixed tariff for the winter are seeing their bills soar as the wholesale energy prices paid by their suppliers continue to rise, with smaller companies such as Ovo and Co-op Energy cranking up prices in recent weeks. Three weeks ago GB Energy went bust after struggling to cope with changing market conditions.

Our key message is that comparing tariffs is the only way to ensure you've got the cheapest deal. You can find the best tariff for your household using our free Cheap Energy Club comparison tool.

'Lifting the lid on price differences'

Ofgem's table – which can be viewed on its website – compares the average energy bill paid by a typical dual-fuel household on a standard variable tariff from one of Britain's biggest providers with the average cost of deals from the 10 cheapest suppliers.

The data comes with some important caveats. For example, it assumes customers are paying via direct debit, which is often cheaper than using prepayment meters or paying on receipt of your bill. So for a typical household not paying by direct debit, costs are likely to be higher.

Suppliers that have more than 90% of their customers on prepayment meters have been excluded from the data, as have those with fewer than 250,000 customer accounts – which may mean the 10 cheapest deals Ofgem uses to calculate its average are not always the very cheapest around.

However, the table does provide a useful snapshot of the extent to which some households are overpaying, with a typical household on Extra Energy's standard tariff paying about £260 more than they would on the cheapest deals.

Ofgem's league table – 14 December 2016

Energy Secretary Greg Clark has praised the publication of the tables, stating: "Millions of people across Britain continue to pay too much for their energy. The measures announced today are a positive step to help more people benefit from increased choice and competition."

And Citizens Advice chief executive Gillian Guy said the table would "lift the lid on the price difference between standard tariffs and cheaper deals, helping those customers who are currently paying over the odds for their gas and electricity identify a better rate".

Additional reporting by the Press Association.