Energy regulator Ofgem has today (14 May) opened a consultation on removing the ban on acquisition-only tariffs (BAT) this year.
Acquisition-only tariffs are a way for energy suppliers to entice new customers to move suppliers by offering them cheaper prices. 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.
In a consultation paper by Ofgem, the energy regulator disclosed that retaining the BAT as an enduring market measure was “not compelling for either market stability or price protection reasons”.
Despite this, the paper noted that BAT introduced “other potential market effects, the continuation of which may or may not be in consumers’ interests beyond March 2024” but concluded that there is a “strong case to remove the BAT.”
Ofgem proposals to remove the BAT
As part of the consultation, which invites opinions from various energy market players, Ofgem outlined its proposals to remove the BAT and “minded-to” position.
Ofgem’s analysis suggests that keeping the BAT is no longer essential for market stability and may lead to higher prices for consumers. The supposed benefits, such as improved non-price competition and supplier stability, are unlikely to outweigh the increased costs to consumers.
To that extent, Ofgem would expect more active competition to result in improved quality of service over time to retain customers, thus prompting better market conditions and customer treatment.
The regulator is also consulting on the removal of the Market Wide Derogation for fixed retention tariffs for the same two time periods.
Removing BAT early is ‘good news for households’
Richard Neudegg, director of regulation at Uswitch.com, believes that getting rid of the BAT in October heralds “good news for households seeking cheaper energy bills”.
He added: “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 fixed 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.”
