Collective energy buying is a practice where a group of consumers (businesses, homeowners or even small municipalities) get together and pool their resources to buy gas and electricity at cheaper prices.
Sound like hard work? Think again
Although there is no set model for how these collective switching schemes work, the arrangement is normally facilitated by a third party who is in charge of organising the individual members and negotiating contracts.
These third parties usually organise collective buying groups. But the group’s individual members never have to meet or talk or even live in the same country. As long as each member uses over a pre-determined threshold, and as long as they can all renew a contract at the same time (usually in September) then they will be accepted. In this way, the barriers to entry are very small.
Surge in popularity
In 2012, collective purchasing schemes received a resounding endorsement from the government, especially those targeted at individual consumers.
One Department for Energy and Climate Change (DECC) document reads: “Collective purchasing and switching have the potential to empower consumers to get a better deal on their gas and electricity bills and save individual consumers having to shop around and compare tariffs themselves.”
After some initial interest from consumer groups, enthusiasm for residential projects never really translated into a wide scale uptake. In the last year or so, however, similar schemes on the continent in countries like the Netherlands and Belgium have been very successful. Not surprisingly people in the UK are starting to take notice again.
MoneySuperMarket boffins reckon that households can save over £200 pounds per year on their energy if they take part in what they call a ‘collective purchase switching scheme’.
Unfortunately, no one seems to have done similar research into collective energy switching schemes for businesses. But from where I’m standing, I can tell you that my business gas buying groups have never been bigger.
Advantages of aggregate energy buying
- Cheaper energy prices
This is without doubt the biggest advantage to collective switching. And the best part, the prices only get cheaper as more stakeholders join. So you can actively reduce your energy bills by encouraging more participants to sign up. Think of it like a ‘refer a friend’ bonus – but there’s no limit to how many people you refer, and the M&S Gift Cards are a lot bigger.
- Potential for green energy buying
As we’ve already mentioned, there’s no clear structure or pattern for energy buying groups. The terms of the deal are normally laid out by the third party, but they aren’t always formed with lower prices in mind.
Other potential benefits include things like a collective commitment to using green energy, or a deal on energy saving products.
- Easy to join
The one, relatively minor barrier to entry is that you have to meet certain usage thresholds. This might sound daunting but Business Gas.com has a buying group for companies which use under 100,000 kWh of gas per year.
Residential buying groups tend to be run in small local areas. Careful research will reveal the right one for you.
- Many policies include a free smart energy meter to help keep track of consumption
Because it’s important to track member consumption, the third party organisers will issue companies with smart meters, gas loggers and other intelligent monitoring systems to help them keep track of usage.
These technologies not only help to monitor energy consumption, but they also have the power to help members cut their energy bills by identifying and eliminating areas of waste.
- Peace of mind and a sense of ‘safety in numbers’
Most people laugh when I talk about safety in numbers but it really is true. I’ve managed two successful business gas buying groups for a number of years now and peace of mind is probably the comment I hear most frequently from members.
Buying energy is stressful. Especially if you are purchasing on behalf of a company and you are coming under pressure to reduce bills by 10 or 20 percent. Most find reassurance in the fact that their energy is in the hands of a market expert. And there’s a certain ‘je ne sais quoi’ in knowing that your fate is tied to a number of other businesses.
There are downsides – one of the biggest is that the collective quote can only be renewed once a year, usually at the end of September.
If you are very quick you might be able to sneak in, otherwise you’ll have to go on a ‘waiting’ contract which is more expensive.
For a limited time Business Gas.com are offering businesses a free M&S Gift Card worth up to £750 when they join one of the Business Gas.com gas buying groups.