Ofgem considers reversing ban on acquisition-only tariffs to see new customers get cheaper energy deals
Ofgem has proposed bringing ahead the removing of a ban on energy corporations providing cheaper deals to new customers, in a bid to generate competitors between suppliers.
The proposed motion might happen from October that means customers may very well be provided higher deals with different suppliers this winter.
These acquisition-only tariffs provided cheaper costs just for new customers to lure them away from their present provider.
To shield shoppers throughout the energy disaster, a ban on these deals was launched as a short-term measure in April 2022. It is due to be lifted in March subsequent 12 months.
However, the regulator has in the present day stated that it’s the proper time to contemplate eradicating the rule because the energy market recovers.
It stated the transfer would drive a quicker return to competitors and higher value financial savings and repair requirements for shoppers.
Acquisition-only tariffs provided cheaper costs just for new customers to lure them away from their present provider
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The session considers two potential timelines for the removing: after six months, beginning October 1, 2024, or on the finish of the prevailing extension interval on March 31, 2025.
The session seeks to decide essentially the most applicable timeline for the removing whereas contemplating market stability and providers hedging dangers.
Martin Lewis, the founder and chairman of Money Saving Expert, stated: “The energy market is damaged. We want something attainable proper now to stimulate competitors and convey costs down.
“In regular occasions, I wouldn’t name for corporations to be allowed to supply new customers cheaper costs than present, but these aren’t regular occasions.
“The present UK retail energy system was constructed on the premise that corporations would combat one another for customers and compete on value – but that’s hardly occurring.
“Most corporations are at present comfortable to sit on their present customers and revenue – the place as soon as you may change and save 30 per cent, now it’s just a few per cent at most.
“So, in actuality, the Energy Price Cap, arrange as a remedial backstop charge, is now just about the worth.”
The common value of energy for a typical family that makes use of fuel and electrical energy and pays by Direct Debit fell by £238 per 12 months on April 1. Those who use extra energy can pay extra.
This diminished the energy value cap from £1,928 to £1,690 per 12 months, a discount of round 12 per cent.
If the ban goes forward, an knowledgeable has said it is going to be excellent news for households in search of a cheaper invoice.
Richard Neudegg, director of regulation at Uswitch, stated: “Getting rid of the ban on acquisition-only tariffs in October heralds excellent news for households in search of cheaper energy payments.
“With a remaining choice from Ofgem due in July, this transfer is a no brainer to enhance the probabilities of first rate fastened deals in time for winter.
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“Removing the ban will incentivise suppliers to work more durable to compete for customers on value, service and selection.”
However, Simon Francis, coordinator of the End Fuel Poverty Coalition, stated that ending the ban could lead on to an increase in discriminatory tariffs that penalised individuals primarily based on the place they dwell, their meter kind or in the event that they had been on a precedence register.
He stated: “In 2009 Ofgem banned discriminatory pricing after tariffs emerged which had unexplained differentials between cost strategies, between areas and between fuels (fuel and electrical energy). However, in 2012, the licence situation which banned these tariffs was allowed to lapse.
“If Ofgem needs market situations to return, it should additionally beef up its shopper protections and guarantee we don’t see a surge in discriminatory tariffs.”
