Following a consultation in May, energy suppliers will have to offer the same deals for existing customers as they do for new customers until at least 31 March 2025.
The Ban on Acquisition-Only Tariffs (BATs) was mooted by Ofgem to end on 1 October 2024 after conversations with consumer groups, charities and industry experts.
This was decided “in the best interest of all customers”, according to Charlotte Friel, Ofgem’s interim director.
Friel said: “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 policy was originally introduced in April 2022 to stabilise the energy market after almost 30 firms including Avro Energy, Green and CNG Energy crashed out of the market in 2021.
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However, this was extended to 31 March 2023 following the Russian invasion of Ukraine, as energy bills were still deemed too high and volatile.
It coincided with Ofgem’s Market Stabilisation Charge (MSC), which forced energy suppliers to pay a fee to a customer’s previous provider should they choose to switch. This was to reimburse firms that bought wholesale amounts of energy that had lost a customer who decided to switch.
One industry expert has slammed the decision, which means customers are less incentivised by the cheaper deals available with new suppliers.
‘Disappointing to see an economic regulator go against evidence’
Richard Neudegg, director of regulation at Uswitch.com, described Ofgem’s decision as “a hammer blow” to households, especially as a “difficult winter approaches”, with prices forecast to rise 10% on July’s energy price cap of £1,559.61.
Neudegg said: “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.
“Ofgem’s own analysis concludes that retaining the BAT 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.
“Now the market is in a more stable position, the ban is reducing the chance of suppliers from offering discounted prices and cheaper deals to both new and existing customers, at a time when they are desperately needed.”
Neudegg added: “This is a missed opportunity for Ofgem to remove the protective bubble around suppliers and to support consumers, who are already facing the prospect of higher bills this winter. Now was the time for action, not more deliberation.”
