Ofgem may allow cheaper energy deals for switching customers
The energy regulator, Ofgem, published a consultation this week that could affect your energy bills.
It is considering the reintroduction of ‘acquisition tariffs’ which are offered by energy suppliers to attract new customers to switch. A ban on these that came into force in April 2022 as the Russian invasion of Ukraine sent energy pricing into a volatile state. Since that time, we have seen significant market changes including consolidation with the likes of Octopus Energy buying Shell Energy and Bulb customers. There has also be a sizable reduction in the amount of customers switching providers – dropping to a 1/3 of what it was in March 2021.
On the surface, consumers could be delighted by cheaper deals offered by suppliers and benefit from reduction in their bills. However, do your homework first. One of the cautions that came with special deals before was that suppliers sometimes discriminated offering better rates only to those in certain postcodes, for example.
As with any contract with incentives, consumers may need to be vigilant for price hikes as the contract ends. However, we know the telecoms market has become notorious for mid-contract price rises, allowing for ISPs to increase the monthly subscription by the Retail Price Index (RPI) to keep in line with inflation. Could this be something operators look to use as a means to gaining more from tied-in customers?
How energy suppliers respond to this consultation could be interesting as potentially it could lead to a ‘race to the bottom’ scenario seeing market changes in an already uncompetitive market. Perhaps the more creative (of which there’s only Octopus in the larger players) could again look to the telecoms market to consider bundling with other services like broadband – or perhaps there’s could be a new entrant in Sky or BT into the energy sector?
We know clearly presented time-shifted tariffs to be beneficial but will energy companies want to stand out with making this differentiation? Those with solar energy and battery storage can make the most of cheaper off peak tariffs (see blog here). We’ll be looking out for those being front and centre.
What the effect will be on business tariffs is still unknown. In the past, even small businesses have gained little or no benefit from many of Ofgem’s consumer changes so the argument for investing in renewable energy solutions still remains crucial. We are seeing no reduction in commercial tariffs, which remain high putting additional and unnecessary pressure on industry.