Ofgem is considering extending the ban on acquisition-only tariffs beyond March 2024.
The ban was introduced alongside the Market Stabilisation Charge (MSC) as a temporary measure to ensure fair competition in 2022 as wholesale energy prices began to soar.
Earlier this month, the regulator confirmed that the MSC, which has been extended several times in the past, will finally come to an end in March next year.
However, Ofgem has now revealed that it is open to extending the ban on acquisition-only tariffs as a “standalone measure, while the price cap remains in place”.
To inform its decision, Ofgem is asking for interested parties to submit evidence as part of a consultation which will run until 23 November.
The regulator said that while the ban was “primarily introduced to complement the MSC as a market stabilisation measure it has other effects on the market, the continuation of which may or may not be in consumers’ interests beyond March 2024”.
“By requiring suppliers to make their tariffs available to both new and existing customers, the reduces the incentive for suppliers to offer very aggressive acquisition pricing during periods of volatile wholesale prices,” Ofgem states in its consultation document.
“This has complemented the MSC’s role by collectively reducing incentives to offer prices that could threaten market stability.”
However, Ofgem adds that the combination of the MSC and the ban has “played a significant part in reducing levels of switching”.
It adds: “Competition is an important feature of the market as rivalry between energy firms gives a strong incentive for improvements in innovation and service as well as price. In this context, we are considering the optimal level and type of competition required for a healthy market and the overall impact on competition for suppliers and consumers in this context.”
Ofgem adds that while the ban “may have had a dampening effect on competition by reducing switching to and within incumbent suppliers, it may also favour new market entrants on the basis that they are more able than existing suppliers to offer attractive deals to win customers”.
It adds: “Whilst an increase in market competition through the removal of the could lead to consumer benefits, our analysis of the disbenefits of reduced price competition owing to the also suggest that where competition could occur, these benefits would be felt more by active and engaged rather than inactive consumers.
“At its simplest level there are two main effects – a positive benefit for non-switchers, to the extent that any discounts offered to new customers have to also be offered to existing customers (expanded on in the next section).
“This, however, would be accompanied by a corresponding negative effect for active switchers, who are likely to see less choice as a result of suppliers with a large existing customer base being less willing to offer cheaper tariffs.”
As part of its consultation, Ofgem is also asking for views on the ban’s impact on tariff offerings, market stability and competition.
Ofgem said it intends to set out its position in relation to the ban in the new year “in good time” before the ban is currently set to expire at the end of March 2024.