When did you last switch your energy provider? For renters and homeowners alike, managing the cost of our electricity and gas supply is a major headache.
Consumers are encouraged to switch regularly, not only in order to find cheaper deals and save money, but also to ensure that the energy market remains competitive and offers the public a better service.
Government statistics show that the number of energy switchers has been steadily growing since 2014. According to the trade body Energy UK, last year was a record for switching, with over 5.8m people changing their provider.
However, this still only equates to about one in five customers – many more are stuck on bad deals. Even if a customer is told by their supplier that they’re on its “best tariff”, that doesn’t mean that they have a competitive deal – there may be a cheaper offer available with a different company.
And even the most diligent energy switcher may occasionally forget to change their supplier and will subsequently get stung when their cheap fixed-price deal ends and reverts to the company’s standard variable rate (SVR).
The SVR can be incredibly expensive. Even with the energy price cap set by the regulator Ofgem, these default tariffs can cost the average household as much as £1,137 a year. For comparison, the cheapest tariff found by Ofgem comes in at £892 – a difference of £245.
The scope for saving may be huge, but who has the time to constantly check for new deals? The answer is to let a business do it for you instead.
UK startup Look After My Bills helps consumers slash their bills by automatically switching their energy deal whenever a cheaper one is available.
Last month, it reached a milestone of signing up 100,000 customers to its switching service since August 2018. The company claims to have helped users save £15.3m on energy bills, and estimates that the British public is missing out on a potential £2bn of savings by not switching providers.
“Last year, we had a lightbulb moment and realised that automatic switching solved a massive pain point for time-poor Brits,” says Will Hodson, co-founder of Look After My Bills.
“The current energy system is a bit like Freddie Krueger: it waits for you to fall asleep and stop switching, and then it kills you with hugely punitive tariffs. We really believe that energy is a broken consumer market. The incentives are the wrong way around – and are set up to punish loyal people.”
There are now several automatic switching companies out there, with different business models. Look After My Bills and its competitors Migrate and Weflip offer a free service to consumers, making money from commission paid by the energy firms they switch customers to. Others, such as Flipper, charge an annual membership fee for users.
But the reason that Look After My Bills has shot to prominence is its appearance on the BBC investment programme Dragon’s Den in 2018.
Hodson and co-founder Henry de Zoete managed to secure the best deal in the show’s 13-year history, receiving £120,000 from two “Dragons” in exchange for a three per cent stake in the company – valuing the business at £6m.
One of these investors, Jenny Campbell, says that she invested in the company not only because she liked its founders, but also because she found the ethos of the business compelling.
“I just got the product straight away,” she says. “We all like to think that we can switch our energy and save some money, but we never get round to it, and so auto-switching just makes sense. This is also very ethical as well – it provides something to the market that helps consumers save money.”
Campbell agrees with Hodson that there are problems in the energy industry which make it come across as anti-consumer.
“Whether it’s perception or reality, I always feel that when energy prices go up, the increases are applied pretty quickly to the consumer, but when they come down, there always seems to be some reason that they can’t come down as fast. It doesn’t feel very fair or transparent to the consumer.”
She adds that the company can help hold the big energy companies to account – if they don’t provide the best deal they can to consumers, they’ll lose business, as Look After My Bills and its rivals automatically switch customers to better deals elsewhere.
Looking beyond energy, there is a broader scope for this emerging switching industry to help consumers keep down household costs by automatically considering other contracts, such as mortgages and phones.
Utilities companies across the spectrum should be paying attention to this burgeoning trend of automatic switchers, and making sure that they stay competitive. In fact, Look After My Bills is already planning to expand to cover the broadband market.
“Broadband costs are not very transparent,” says Campbell. “It’s something that takes people a long time to work out if they’re getting the best deal. For me personally, if I can get someone else to do it for me and save me money, hallelujah, they can have my business.”
Consumer advocates and political groups are constantly calling for alternative methods to make the energy market cheaper and fairer to customers. Some make the case for renationalising energy companies, while others want to deregulate the market entirely.
This argument over which is right will rage on, but in the meantime, the automatic switchers offer a free market solution that helps to put at least some power back in the hands of consumers.