Ofgem: full steam ahead on faster switching

A £1 saving in indivudual consumer bills – because the domestic market was more competitive – would more than offset all the costs of a faster switching programme, says Ofgem. It based that on CMA estimates that domestic consumers as a whole paid an average of £1.4 billion a year more than they would have done under well-functioning retail markets over the period 2012 to 2015.

Publishing its full business case for the programme, the regulator admitted that costs had risen  by £94 million from to £426 million since it published an Outline Business Case. That was due to:

  • A longer ‘design, build and test’ (DBT) phase than originally planned, which has the effect of both increasing forecast cost and delaying forecast benefits. Ofgem says the change reduces delivery risk.
  • Significant revisions in the cost of making changes to existing systems at suppliers. Ofgem has increased the total one-off cost of ‘other industry’ participants by £28.7 million.
  • Thirdly, it reflects higher than expected costs with regard to programme coordination and assurance.
  • Plans for a customer enquiry service to be separately developed by industry.

The range of expected net benefits is now lower than it was in the Outline Business Case, but Ofgem says a £185-1,077 million benfits is “a compelling case for intervention”.

The regulator says it has learned lessons from the smart meter rollout and tried to ‘future proof’ a new central switching service.  Bidders were tested on how their systems would be designed to support innovation and address three plausible change scenarios: allowing multiple suppliers per meter point; creating demand points behind a meter point; and circumstances where the customer’s relationship is with an industry party other than a supplier (disintermediation).