Ofgem to trial collective energy deal for 50,000 customers who haven't switched in 3+ years

Ofgem is to launch its first ever collective in a bid to encourage disengaged customers - those that have been on their energy supplier's standard variable tariff (SVT) for at least three years - to switch to a cheaper deal.

It says they may not have switched because they don't shop around, they're more likely to be concerned about switching, are worried about the hassle or are less confident comparing tariffs to find the best deals.

The Ofgem trial will target customers from one of the big six energy firms - which hasn't yet been named - and offer them the option to move to a specially negotiated tariff, together with a simple switching process either online or by phone. Ofgem hopes this 'helping hand' will mean more people switch - the main driver behind the trial.

Don't wait, join the 3.2m members in our Cheap Energy Club to help you compare the best deals on the market.

What is a Standard Variable Tariff?

SVTs are energy suppliers' default tariffs and are nearly always the most expensive, but almost 60% of households are on one. If you've never switched or your fixed deal is over, it's likely you're on one of these. SVT costs are variable so the rate you pay can change – but there are no exit fees or fixed end date.

Conversly, a fixed-price tariff essentially means the unit price you agree to pay for your energy is set for a certain period such as one or two years, meaning it won't increase for the duration of the fix, but it may have exit fees if you decide to switch before it ends.

Customers who are on one of the big six energy firms' SVTs pay an average £1,130/yr based on typical use, compared to £807/yr on a variable tariff from the cheapest supplier on the market, so they could save £320+/yr by switching.

What is a collective switch?

A collective switch is where energy firms bid to offer you their best tariffs via a trusted go-between (eg, a council or, in this case, a partner appointed by Ofgem, such as a comparison site).

The go-between negotiates the best tariff - which is usually an exclusive deal - and then helps eligible customers to switch to the provider.

MoneySavingExpert.com has run nine collective switches to date, with over 500,000 users having switched in this way to collectively save millions of pounds on their annual bills.

What do we know so far about the trial?

Some details are still be confirmed, but here is what we know so far:

• Ofgem won't run the collective – Instead it will appoint a consumer partner, such as a comparison site, to run it for them.

• It is open to 50,000 customers who have been on an SVT for at least three years – They will be randomly picked from one big six provider, which will be named during the trial.

• Letters will be sent in the next few weeks – They will explain how the collective switch trial will work and details of how to opt out of your data being passed to the company that will run the collective.

• The collective tariff price will be negotiated in March – Ofgem says this will be a competitive, ideally market-leading tariff.

• Customers will be able to switch online or by phone in March and April – Customers can switch to the collective tariff or do a wider search comparing tariffs across the market.

• The trial will finish in April.

How do I switch energy providers?

You don't need to wait for Ofgem's collective switch to change providers and slash your bills.

In practical terms, switching isn't a big deal. No one usually has to visit your home, it's the same gas, same electricity, even the same safety - the only changes are price and service.

Our Cheap Energy Club can help you to switch energy suppliers and has over 3.2 million members. See this video from MoneySavingExpert founder Martin Lewis and more tips in our Cheap Gas & Electricity guide.

What does Ofgem say?

Rob Salter-Church, interim senior partner for consumers and competition, said: "Ofgem is committed to getting all consumers a better energy deal.

"We will protect consumers who don't switch from being charged too much while we put in place the building blocks for a more competitive market.

"In the long term, we believe that competition, combined with protection for those who need it, is the best way to deliver the best energy deal for all consumers."