With news that Ofgem has opened a consultation on removing the ban on acquisition-only tariffs (BAT) this year, the energy industry has weighed in on the prospect.
Acquisition-only tariffs are a way for energy suppliers to entice new customers to move suppliers by offering them cheaper prices.
Octopus Energy, who recently officially became the largest electricity supplier in the GB market, warned that removing the ban could well mark the return of the “Wild West” of the energy industry.
Rachel Fletcher, director of economics and regulation at Octopus Energy, said: “Allowing suppliers to block their best deals from loyal customers would return the ‘Wild West’ of the energy industry.”
“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.
“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.”
Not-for-profit organisation Citizen’s Advice also believe that lifting the BAT could have negative implications, especially for older and disabled customers.
On the topic, Gillian Cooper, director of energy at Citizen’s Advice said: “The BAT prevents suppliers from locking loyal customers out of their cheapest deals. Removing it would unfairly hit older and disabled consumers the hardest, as they are less likely to switch to a new supplier.
“It 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.
“Keeping the ban in place is a no-brainer. Ofgem must resist pressure to scrap it and ensure suppliers are proactively keeping customers up to date about their cheapest deals.”
Richard Neudegg, director of regulation at Uswitch.com, on the other hand, sees positives in lifting the BAT, stating that it heralds “good news for households seeking cheaper energy bills”.
He said: “Getting rid of the BAT in October heralds good news for households seeking cheaper energy bills.
“With a final decision from Ofgem due in July, this move is a no-brainer to improve the chances of decent fixed deals in time for winter.
“Forcing providers to offer the same energy deals to new and existing customers has meant that suppliers have been encouraged to give up delivering cheap deals.
“But with the price cap changing every three months, consumers desperately need good value fix options to give them more certainty on their bills. It makes complete sense for Ofgem to remove the piece of regulation that is actively holding this back.
“Removing the ban will incentivise providers to work harder to compete for customers on price, service and choice.”
Ofgem begins consultation on lifting BAT
A ban was enforced in April 2022 to protect consumers during the energy crisis, which left 3.2 million people without electricity in 2022.
If a plan is agreed upon, Ofgem could remove the ban from 1 October 2024. A second potential removal date is the end of the existing BAT extension period, on 31 March 2025.
Consultation responses are due by 11 June 2024 with a decision expected in July 2024.
