Ofgem considers lifting ban on cheaper energy deals for new customers

Rules stopping energy suppliers from offering energy deals exclusively to new customers could come to an end in October.

Energy regulator Ofgem is consulting on scrapping the ban on offering cheaper energy deals to new customers, known as acquisition-only tariffs.

Ofgem said now was the time to look into lifting the ban as energy prices slide; energy price cap fell by 12.3% in April – the lowest in two years, and could fall even more in the coming months. Ofgem has also launched a consultation on the future of the energy price cap to ‘future-proof’ consumer price protection.

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We look at what lifting the ban could mean for you and why shopping around for energy could become even more important.

Ofgem to remove ban on cheaper energy deals 

Ofgem said the ban on energy suppliers offering discounted deals to tempt new customers to ‘switch and save’ could be scrapped in October. 

The ban was originally put into place in April 2022, when Russia invaded Ukraine and sparked an energy crisis across Europe. The ban prevented energy suppliers from giving exclusive cheap deals to new customers only.

To shield consumers and stabilise the volatile wholesale market, Ofgem introduced the ban which was only supposed to last till March 2023. However, it was stretched for a further two years until 31 March 2025 as energy prices remained high.

Now, with energy costs sliding, Ofgem said now could be the right time to lift the ban. The move could see the return of lower prices and competitive energy switching incentives from 1 October, or even earlier.

Tim Jarvis, director general of markets at Ofgem, said: “The Ban on Acquisition-only Tariffs (BAT) was introduced in April 2022 to protect consumers during the energy crisis, and was always designed to be a time-limited measure. As the market continues to stabilise, now is the right time to consider removing it.   

“Other measures we have introduced to make the market more resilient – in addition to the role the price cap plays to protect loyal customers from being exploited – lessens the need for a ban on targeted introductory tariffs.  

“We continue to look at the bigger picture as part of our review of standing charges, affordability and debt. A variety of different tariffs have returned to the market and switching has been picking up. We will continue to monitor competitive developments closely.” 

This move is supported by data from Ofgem which shows that there has been an increase in energy switching by 157% compared to two years ago. Plus, the number of households that switched their electricity suppliers jumped from 173,661 in January 2024 to 174,369 in February 2024 – up by 2,708.

What does Ofgem's ban reversal mean for energy deals?

Though energy bills fell by 12.3% and came down to an average of £1,690 on 1 April, it's expected to drop 7.7% this summer according to predictions by analysts at Cornwall Insight. That's a -20% fall in typical energy bills as compared to the January price cap, and slashes monthly bills by approximately £10.83.  

With the ban potentially lifting right before winter, it should give households more opportunities to find competitive energy deals rather than those that sway just under the energy price cap, which will rise to around £1,636 in October.  

However, Ofgem has said to not keep hopes too high, as the reversal of the ban wouldn't bring back cheap energy deals that were often seen before 2021.             

Not everyone’s happy with Ofgem’s latest announcement. Citizen’s Advice called for the ban to be made permanent, as it would allow suppliers to gatekeep exclusive deals from existing suppliers by offering them on price comparison sites. 

Gillian Cooper, director of energy at Citizens Advice said, “The ban on acquisition tariffs prevents suppliers from locking loyal customers out of their cheapest deals. Removing it would unfairly hit older and disabled consumers the hardest, as they are less likely to switch to a new supplier.

“It also protects millions of people with energy debt, whose suppliers can block them from switching, as it means they don't have to stay on the most expensive tariffs pushing them even further into the red.

“Keeping the ban in place is a no-brainer. Ofgem must resist pressure to scrap it and ensure suppliers are proactively keeping customers up to date about their cheapest deals.”

Energy supplier So Energy also opposed the ban and backed it with research showing that nine out of ten energy customers oppose Ofgem’s proposal to end the ban.

So Energy’s CEO and co-founder Simon Oscroft said: “Ofgem’s proposal is terrible news for energy customers... It’s a scandal that suppliers may soon be able to hide their best deals from their loyal and often vulnerable customers. It will destroy trust by embedding discriminatory pricing practices into the market, just as fixed deals are beginning to reappear in the market.”

To give some context, when wholesale prices spiked during the energy crisis, cheap energy deals became unviable and were subsequently withdrawn from the market. This made the Ofgem energy price cap the cheapest of them all, and saw a majority of customers opt for price-capped deals. 

Now with the market stabilising, there's hope that cheaper energy deals will come into the picture, but we may have to wait for a while before things change.