Households could see major energy bills change this year with Ofgem announcement

Energy companies will be able to attract new customers with lower prices when the ban is lifted
Energy companies will be able to attract new customers with lower prices when the ban is lifted -Credit:Getty Images/iStockphoto

A major change could be on the way for household energy bills after the regulator announced it could allow competition between suppliers to resume earlier than planned.

Ofgem confirmed on May 14 that it is consulting on removing the ban on acquisition-only tariffs - in other words, cheaper energy deals that are only offered to new customers in a bid to encourage them to switch suppliers. The ban was initially introduced in April 2022 as a means of protecting consumers during the energy crisis, and was due to be lifted in March next year.

However, these deals could now make a comeback as soon as October after Ofgem said that now is the right time to consider lifting the ban as the energy market continues to stabilise. The regulator added that the move would drive a faster return to competition, leading to better price savings and service standards for customers.

Money expert Martin Lewis said of the proposal: "The energy market is broken. We need anything possible right now to stimulate competition and bring prices down.

"In normal times, I wouldn't call for firms to be allowed to offer new customers cheaper prices than existing, yet these aren't normal times. The current UK retail energy system was built on the premise that firms would fight each other for customers and compete on price - yet that's hardly happening."

He added: "Most firms are currently happy to sit on their existing customers and profit - where once you could switch and save 30%, now it's a few percent at most. So, in reality, the Energy Price Cap, set up as a remedial backstop rate, is now pretty much the price."

Richard Neudegg, director of regulation at Uswitch, also described the proposed early lifting of the ban as "good news" for households seeking cheaper energy bills. "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," he explained.

"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," he added.

However, Simon Francis, coordinator of the End Fuel Poverty Coalition, said that ending the ban could lead to a rise in discriminatory tariffs that penalised people based on where they live, their meter type or if they were on a priority register. "If Ofgem wants market conditions to return, it must also beef up its consumer protections and ensure we don’t see a surge in discriminatory tariffs," he said.

The ban on acquisition-only tariffs is the last remaining measure put in place by Ofgem to help stabilise the market at the height of the energy crisis. Earlier this year, the regulator also scrapped the the 'Market Stabilisation Charge', which required energy suppliers to pay a charge to the previous supplier for every customer that switched to them, which acted as a deterrent for energy firms to offer competitive deals.