In a remarkable U-turn, Ofgem has clung onto the ban on acquisition-only tariffs, despite suggesting a mere two months before that it might scrap the measure.
This prohibition offering enticing cheaper rates exclusively to new customers in a bid to coax them away from current providers was set up as a temporary expedient last April amid the burgeoning energy crisis. Originally, the plan was to phase it out by March of the following year.
Come May, the regulator had voiced opinions about the appropriateness of binning this ban, pointing to signs of market stabilisation that could rekindle competition and ultimately yield sharper pricing and improved service for consumers.
Nonetheless, the stance has shifted once more, with assurances that the ban will persist until at least its intended end date of 31 March next year. This decision is aimed at guaranteeing that all households have an equal shot at securing the finest deals out there.
During a mandatory consultation in May, activists voiced strong reservations against ditching the regulation. They cautioned it could revert to unfair practices towards so-called inactive switcher often hit with the “loyalty penalty” and erode trust among consumers.
Adding weight to their argument was the point that the ban kept millions, especially those debt-saddled customers prevented from switching for potentially extended periods, within reach of preferable offers from their existing suppliers.
Ofgem’s interim director for consumer protection and retail markets, Charlotte Friel, acknowledged the reshaped policies, stating: “We have heard the voices of consumers loud and clear and we have responded.”
Ofgem has made a firm commitment to act in the best interest of all customers, with public feedback playing a crucial role in guiding their actions. The regulator noted: “We are committed to acting in the best interest of all customers and the feedback we get from the public, industry, consumer groups and charities is vital in shaping the work we do. The responses we received showed a strong strength of feeling against short-term cut-price tariffs that shut out a supplier’s existing customers.”
The watchdog emphasised the importance of consumer trust alongside competition, stating: “Whilst competition is an important part in driving better standards, so too is consumer trust and it is clear that denying the best deals to all risks undermining the progress we have made to restore confidence in the energy market.”
Highlighting consumer rights, Ofgem added: “Customers have the right to vote with their feet and switch suppliers for better service, or more support, but retaining the BAT will mean that they don’t have to keep moving to chase the best rate.”
Currently, Ofgem is deliberating on the future of price protection measures, including the appropriateness of the current price cap and the possibility of a permanent ban on acquisition tariffs.
The decision was met with approval from consumer advocates. Gillian Cooper, director of energy at Citizens Advice, praised the move: “Ofgem’s decision to extend the ban on acquisition-only tariffs is the right one. It means that customers who stay with their supplier won’t be punished for their loyalty, and the 2.3 million households in debt to their energy supplier who can’t switch can still access better deals.”
“The energy market is increasingly complex and this decision will provide some certainty to the millions of customers worried about their energy bills and who rely on a stable energy market.”
Which? director of policy and advocacy Rocio Concha weighed in: “Removing the ban would have risked shutting existing customers out from the best deals, opening the door to loyalty penalties. Our research has shown that consumers overwhelmingly believe this is unfair even when they might stand to benefit.”
“It is particularly encouraging to see that Ofgem intends to extend the ban until 2026, which will give the regulator the chance to properly consider whether it should become a permanent fixture of the market.”
According to Simon Francis, co-ordinator of the End Fuel Poverty Coalition, “With energy debt levels rising due to the record energy prices, now is not the time to allow firms to offer these tariffs, which also disadvantage existing loyal customers and risk creating market instability.”
“Even energy firms such as Eon, Octopus, So Energy and Rebel Energy opposed lifting the ban along with consumer groups such as Citizens Advice, Fair by Design and Which? “.
“We’re pleased Ofgem has taken the side of struggling households on this issue.”
Nonetheless, Richard Neudegg of comparison site Uswitch denoted the move as a “hammer blow” to households seeking cheaper energy deals.
He commented: “The ban was introduced as a temporary measure to help stabilise the market during the energy crisis and to protect suppliers, but it has done nothing for consumers other than artificially raise prices.”
Furthermore, he expressed disenchantment with the regulatory body, saying, “Ofgem’s own analysis concludes that retaining the ban is ‘likely to result in net costs to consumers through increased prices’. It is disappointing to see an economic regulator go against the evidence, especially on choices that could bring down household bills.”
