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Energy tariff rule change could mean cheaper deals this winter

Energy tariff rule change could mean cheaper deals this winter
Matt Browning
Written By:
Matt Browning
Posted:
14/05/2024
Updated:
14/05/2024

Households could see cheaper fixed energy deals this winter as the regulator proposes a tariff rule change that could spur suppliers’ appetites to compete for new customers once more.

Under current rules, energy suppliers aren’t allowed to offer cheaper deals to new customers if they can’t also provide the same pricing for existing customers.

As part of a consultation by Ofgem, this “Ban on Acquisition-Only Tariffs” (BATs) was expected to end on 31 March 2025.

However, the energy regulator is “minded to” bring this ban in from 1 October 2024 – six months early – based on its analysis that indicated that “the case for retaining the BAT as an enduring market measure was not compelling for either market stability or price protection reasons”.

Industry experts suggested this move would revitalise the energy market and lead to better price competition for customers who have faced soaring bills.

However, the final decision will be confirmed by Ofgem in July.

Energy market stabilisation

The ban was introduced in April 2022 to stabilise the market after 28 energy firms including Avro Energy, Green and CNG Energy crashed out of the market in 2021.

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 brought wholesale amounts of energy that had lost a customer who decided to switch.

The planned lifting of the ban has come due to “extreme prices” in the market slowing down, and as such, the MSC was removed on 1 April this year.

Meanwhile, a separate consultation from the regulator could lead to a new price cap based on the time of day households use energy.

As part of the plans, there could be a new energy price cap based on factors such as a customer’s vulnerability.

‘This move is a no-brainer’

Richard Neudegg, director of regulation at Uswitch.com, believes the BAT being scrapped “heralds good news for households seeking cheaper energy bills”.

Neudegg said: “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.”

Neudegg added: “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.”

Related: Is now the time to fix your energy deal?