Cheaper energy deals won’t return yet as regulator keeps ban in place – but it’s good news for loyal customers
ENERGY customers will not yet be offered cheaper deals to switch to rival suppliers, the regulator announced today.
Firms have been banned from offering deals that are aimed only at new customers since the energy crisis began.
Ofgem has now said it will maintain the ban until at least March 31, 2025.
It comes after the regulator extended the ban on acquisition-only tariffs (BAT) in March for a further 12 months.
It had suggested that the ban could be lifted as soon as October though, and asked for views from energy experts on the matter.
Now, Ofgem has decided to continue with the ban which means that cheaper deals won’t return for those switching to new suppliers.
But it’s good news for loyal customers, who won’t be penalised for sticking with their existing supplier.
The BAT was introduced in April 2022 to remove the often risky short-term discounted tariffs intended to attract customers to switch suppliers.
It means that energy firms are prevented from offering cheap prices to newbies only, and have to also offer the same deals to existing customers.
During the consultation in May, campaigners warned that proposals to remove the ban risked going back to an unfair market for those who don’t switch – often referred to as the “loyalty penalty” – and damaging consumer trust.
A coalition of energy firms and consumer groups have been calling on the regulator to continue with the ban.
Which?, alongside E.ON, Octopus Energy, So Energy, Rebel Energy, End Fuel Poverty Coalition, Citizens Advice and Fair by Design wrote a letter to Ofgem back in June urging it to keep the ban in place.
In the letter, the organisations warned of the risk of “a return to a market which discriminates against loyal customers”.
They also said lifting the ban could impact customers in debt who can’t switch, but also can’t access a better deal with their existing firm.
'We will stop energy suppliers taking advantage of their customers'
Jonathan Brearley, CEO of Ofgem, exclusively told The Sun:
I know that paying energy bills is a huge struggle for millions of families across Britain.
That is why it is important we all get access to the best possible deals that are available.
That is why during the gas crisis, we banned companies from keeping their best deals for new customers and thus penalising loyal customers who may have been with them for years.
Recently we’ve been asking what we should do next.
And the message is loud and clear: many customers, consumer groups, charities and suppliers want to keep the ban.
People don’t want the bother of switching every few months. Households in energy debt don’t want to be shut out of the best deals. And it is not fair that the most vulnerable who can’t use a computer, or who don’t have time in the working day are penalised for not constantly switching.
So we have listened, and we have made a decision. We will keep this ban in place and will only lift it when we are convinced customers won’t lose out.
Don’t get me wrong. Switching can be a good thing: people should be able to vote with their feet and move suppliers if they want to. It’s one of the best ways to encourage suppliers to offer better services, innovate, and keep prices low.
But when people want a better deal, we want them to have all options open to them, without necessarily having to move to a new company.
Ofgem is here for customers: not for suppliers, and not for the switching websites that profit by keeping people constantly moving.
This is the first of a range of proposals we will be setting out in the coming weeks to protect consumers: to make standing charges fairer, help those who struggle to pay and manage debt, and to support customers who use prepayment meters.
All energy customers should be able to trust they are treated by their suppliers fairly, and I am determined to see that they are.
The Sun campaigned for a ban on acquisition-only tariffs before it was imposed in April 2022.
Dozens of suppliers collapsed in 2021 and 2022, after offering customers super cheap deals, only to then be hit by huge rises in wholesale energy costs.
Charlotte Friel, interim director for consumer protection and retail markets, said: “We have heard the voices of consumers loud and clear – and we have responded.
“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.”
Ms Friel added that while competition is important for driving better standards, “so too is consumer trust”.
Adding: “It is clear that denying the best deals to all risks undermining the progress we have made to restore confidence in the energy market.
“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.”
Ofgem has also so a longer-term future of the BAT will be considered as part of the review of the energy sector.
The regulator said it’s considering the future of price protection – including the suitability of the price cap in an evolving market and the possible role that a permanent ban on acquisition tariffs may play.
The regulator said it will report on its findings in due course.
Responding to today’s announcement Gillian Cooper, director of energy at Citizens Advice, said: “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 2.3million households in debt to their energy supplier who can’t switch can still access better deals.”
Ms Cooper also added that the energy market is “increasingly complex” and the decision will provide some certainty to customers worried about their energy bills and who rely on a stable energy market.
“Ofgem’s taken an important step towards fairer pricing and higher standards in the energy market and we’ll be keeping a close eye on how this affects consumers,” she said.
ON THE OTHER HAND
Not everyone thinks the ban is a good idea though, with consumer champion Martin Lewis regularly voicing his views on bringing back acquisition tariffs.
He believes that the tariffs would bring cheaper gas and electricity deals to the market.
Back in May, when the Ofgem floated the idea of lifting the ban, Martin Lewis said: “The energy market is broken.
“We need anything possible right now to stimulate competition and bring prices down.
“In March, I was staggered when Ofgem told me ‘there is evidence that removing the acquisition only tariff ban would benefit consumers’, but didn’t remove it ‘in case it was moving too quickly’.
“I disagreed and said we should throw the kitchen sink at getting people cheaper deals. So, this is better late than never.”
The money expert said that “in normal times” he wouldn’t call for firms to be allowed to offer new customers cheaper prices than existing ones, but these aren’t normal times.
He said: “The current UK retail energy system was built on the premise that firms would fight each other for customers and compete on price – yet that’s hardly happening.
“Most firms are currently happy to sit on their existing customers and profit – where once you could switch and save 30%, now it’s a few per cent at most.
“So, in reality, the price cap, set up as a remedial backstop rate, is now pretty much the price.”
How to save money on your energy bills
A number of energy firms offer struggling customers grants to cover the cost of bills.
The British Gas Energy Trust is currently offering customers grants worth between £250 and £2,000.
The scheme is closing on April 19 though.
EDF is also offering customers in hardship who have received help from a money advice service grant, with no set limit.
Octopus Energy can also offer you help if you are one of its customers through its Octo Assist Fund.
Ovo Energy, Shell Energy, Scottish Power and Utilita Energy all have their own dedicated funds to help struggling households too.
Eligibility criteria vary between all the suppliers, so you should get in touch with yours to see what help is on offer.
It could also be worth fixing your energy deal so you’re guaranteed to pay a certain amount.
Fixing your energy tariff doesn’t mean you can end up paying more if Ofgem’s price cap falls enough though.
You can use price comparison sites like Compare the Market and MoneySuperMarket to search for the one best suited to your needs.
How do I calculate my energy bill?
BELOW we reveal how you can calculate your own energy bill.
To calculate how much you pay for your energy bill, you must find out your unit rate for gas and electricity and the standing charge for each fuel type.
The unit rate will usually be shown on your bill in p/kWh.The standing charge is a daily charge that is paid 365 days of the year – irrespective of whether or not you use any gas or electricity.
You will then need to note down your own annual energy usage from a previous bill.
Once you have these details, you can work out your gas and electricity costs separately.
Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type – this will give you your usage costs.
You’ll then need to multiply each standing charge by 365 and add this figure to the totals for your usage – this will then give you your annual costs.
Divide this figure by 12, and you’ll be able to determine how much you should expect to pay each month from April 1.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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