Coalition of consumer groups and energy firms urges Ofgem not to shut out existing customers from best deals
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 E.ON, 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.
Which? believes Ofgem should not rush to reintroduce a pricing practice that most consumers find unfair to a market with a history of unfair pricing, low levels of trust, and major difficulties with customer service.
Instead, Ofgem should consider how to create fairer forms of competition and repair the fraught relationship between energy suppliers and consumers.
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.”
ENDS
Notes to editors
The joint letter is available at this link.
Research
Yonder, on behalf of Which?, surveyed a nationally representative sample of 2,090 UK adults between 3rd to 4th June 2024. Of the respondents, 1,912 were jointly or solely responsible for their household’s energy bills.
Respondents were asked about one of two scenarios where they may experience acquisition-only tariffs. One where they would be excluded from a cheaper deal from their own supplier, and another where they found a cheap deal they could switch to but other customers couldn’t.
Half of the sample were given the first scenario and were asked “Please imagine you were looking at the tariffs offered by your current energy supplier, either on their website or a price comparison website. You notice that the cheapest deal they offer is only available to ‘new customers’ and not to existing customers like yourself…How fair or unfair do you think this would be?”
The other half were given the second scenario and were asked “Please imagine you are comparing energy tariffs offered by different energy suppliers, either on their websites or a price comparison website. You notice that the cheapest deal offered by one supplier is only available to ‘new customers’ like yourself and not to its existing customers…How fair or unfair do you think this is?”
Full research is available at this link.
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