A coalition of consumer organisations and energy firms is urging Ofgem not to lift the ban on acquisition-only energy tariffs, which could lead to existing customers being excluded from the best deals and risk opening the door to loyalty penalties.
Ofgem has said it is minded to remove the ban on acquisition-only tariffs – which would be used by energy suppliers to attract new customers or lure switchers from rival firms – from 1 October 2024. It has consulted on this and is due to reach a final decision imminently.
Existing customers would not have access to these deals and Which? is concerned consumers who want to stay with their current supplier could be left worse off. These customers – and new ones whose initial deal expires – face being hit by so-called “loyalty penalties” as their bills jump in subsequent years.
New Which? research shows the public are opposed to cheap deals that exclude existing customers.
The consumer champion has written to the regulator alongside Eon, Octopus, So Energy, Rebel Energy, End Fuel Poverty Coalition, Citizens Advice and Fair by Design, calling for it to reconsider its proposals to lift the ban on acquisition-only tariffs.
In the letter, the organisations warn of the risk of “a return to a market which discriminates against loyal customers”. They also raise the potential impact on customers in debt, who may not be able to switch but could also find themselves struggling to access a better deal with their current supplier under the plans.
The letter highlights the lessons of recent history, when more than 30 suppliers went bust – many after trying to win customers with unsustainably cheap tariffs.
Which?’s latest survey findings show eight in 10 (81%) people would think it was unfair if their supplier was offering cheaper deals to new customers only. A similar number (78%) said they would think this was unfair even if they would potentially benefit in the short term by signing up to a discounted deal.
Rocio Concha, Which? Director of Policy and Advocacy, said:
“Our research has shown that consumers overwhelmingly believe cheaper energy deals only available to new customers are unfair – even when they might stand to benefit.
“That’s why Which? and a coalition of energy firms and consumer organisations have written to Ofgem warning them not to lift the ban on acquisition-only pricing.
“Allowing deals exclusively for new energy customers could open the door to loyalty penalties and would come at the expense of those who wish to stick with their current supplier on their best deal.”
A spokesperson for the End Fuel Poverty Coalition, commented:
“Removing the ban on acquisition tariffs will create price discrimination against loyal customers and also hurt further the millions of households who can’t switch to a new supplier because they are in energy debt.
“Removing the safeguard also means risking a return to the unsustainable form of competition in the energy market that existed before 2021. Suppliers collapsed partly because they had grown too quickly in a market driven by acquisition tariffs.
“Ultimately energy bill payers bore the heavy price of these collapsed firms through the Supplier of Last Resort programme which added billions to households’ standing charges.”
ENDS
The joint letter is available on the Which? website at this link.