Britain’s two-year old ban on energy price cuts designed to lure switchers away from their existing suppliers on rates lower than paid by existing buyers, is under review by industry watchdog Ofgem.
The regulator has given industry players including suppliers & consumer protection bodies until 11 June to comment on its proposals to re-introduce so-called ‘acquisition-only tariffs’.
The consultation follows Ofgem’s recent measures taken to protect consumers – including via a series of rising or falling caps guiding retail tariffs – from rampaging inflation in energy prices. These have been caused by the world’s emergence from Covid lockdowns, and by the neo-fascist Putin’s rapacious aggression since 2022 towards Ukraine.
So-called ‘acquisition-only’ tariffs, available only to new accounts and not to existing customers, have been banned by Ofgem since April 2022, in an effort to stabilise prices in unstable, post-Covid markets. The ban was first extended until March last year, and then until March 2024.
At the end of February, Ofgem announced it would use its existing powers to extend the ban for a further thirteen months, hinting the latest extension would be the last. At the same time, the regulator said it would sound out industry opinion on whether to remove the ban as early as this October, assuming its retail price caps remain in force. The alternative is to leave the ban in place until March next year.
Permitting suppliers to re-launch aggressive customer-recruiting tariffs this autumn, is flagged in the consultation as Ofgem’s preference. An early lift will yield, the body expects will a faster return to competition between suppliers on both price and service factors,
The proposals set out Ofgem’s evaluations of each scenario’s impact on efficient competition in retail energy.
Early response from participants included an argument for retention from Citizens’ Advice, the government’s statutory and independent advisor on fuel poverty.
“Keeping the ban in place is a no-brainer“, Gillian Cooper, CA’s energy director commented. “It prevents suppliers from locking loyal customers out of their cheapest deals.
“Ofgem must resist pressure to scrap it and ensure suppliers are proactively keeping customers up to date about their cheapest deals.
Removing the ban would unfairly hit older and disabled consumers the hardest, said the CA spokesperson, as they are less likely to switch to a new supplier.
“The ban also protects millions of people with energy debt, whose suppliers can block them from switching, as it means they don’t have to stay on the most expensive tariffs pushing them even further into the red.
At Britain’s biggest supplier Octopus Energy, director of regulation Rachel Fletcher agreed.
“Allowing suppliers to block their best deals from loyal customers would be a return to the ‘Wild West’ of the energy industry”, she said.
“The loyalty penalty was a key reason 30 energy companies went bust, and ended up adding billions of pounds on to energy bills. Ofgem was right to ban these unsustainable Del Boy tactics, and it would be crazy to bring them back now”, Fletcher went on.
“Instead we need a more transparent, fairer market where suppliers are forced to compete based on innovation, customer service and efficiency. We need lower prices for everyone, not just the few.”
