Energy bills are on track to fall ahead of winter as the regulator plans the return of cut-price deals.
The industry watchdog Ofgem wants to remove a ban on so-called “acquisition-only tariffs” that have stifled competition in the market.
Under the ban, energy providers have not been allowed to offer cheaper fixed-rate deals exclusively for new customers since April 2022, when the regulator intervened to stabilise the energy markets.
Fierce pricing competition was in part blamed for leading to a number of providers going out of business during the energy bills crisis, when wholesale costs shot up in the wake of Russia’s invasion of Ukraine.
Ofgem had intended to keep the ban in place until next year, but a consultation published by the regulator this week suggests it could be scrapped in October.
The regulator said: “We consider that this will drive a faster return to price and non-price competition, and better price savings and service levels for consumers as a result.”
Consultation documents published by the regulator on Tuesday said that the energy price cap would remain “as an overarching protection against discrimination and unfair pricing” for households who do not shop around for deals.
The news was welcomed by consumer champion Martin Lewis, who said: “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.
“Most firms are currently happy to sit on their existing customers and profit – where once you could switch and save 30pc, now it’s a few percent at most. In reality, the energy price cap, set up as a remedial backstop rate, is now pretty much the price.”
Richard Neudegg, of comparison site USwitch, said the move would be “a no-brainer to improve the chances of decent fixed deals in time for winter”.
He said: “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.
“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.”
Before the energy crisis, households would regularly switch between fixed rates to get the best deals.
Suppliers therefore reserved better rates for new customers, which critics argued amounted to a “loyalty penalty” for customers who stuck with their supplier.
Rachel Fletcher of Octopus Energy said reversing the ban on acquisition-only tariffs could see a return to “the Wild West of the energy industry”.
She added: “The loyalty penalty was a key reason 30 energy companies went bust, and ended up adding billions of pounds on to energy bills.
“Ofgem was right to ban these unsustainable Del Boy tactics, and it would be crazy to bring them back now.”
Most bill payers are still on the standard variable tariff governed by Ofgem’s price cap, which amounts to £1,690 a year for a typical household. This is predicted to fall to £1,560 in July, before rising to £1,631 in October, according to forecasts by analyst Cornwall Insight.
A handful of fixed rates are available for bill payers, but consumer groups have warned that some seemingly attractive deals could leave households worse off if the energy price cap drops.
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