Who really benefits from acquisition only tariffs?

As Ofgem considers removing the current ban on acquisition only tariffs (BAT), an E.ON survey conducted by YouGov has found that 93% of customers say suppliers should not be allowed to offer their best deals to newcomers only.

New research from Which? supports these findings, and on June 29th a group of suppliers and consumer groups including E.ON, Which?, Citizens Advice, Fair by Design, and the End Fuel Poverty Coalition published a letter calling on Ofgem to pause its plans for scrapping the ban come October.

In the face of such broad opposition, any case for removing the BAT needs to consider who these tariffs really benefit and, just as important, who the existing ban serves to protect.

Who really benefits from acquisition only tariffs?

In the short term, acquisition only tariffs are likely to benefit three groups:

• Consumers who have the time, ability, and resources to engage in the energy market and switch suppliers.
• Suppliers who are looking to grow their business by attracting new customers as quickly as possible.
• Price comparison services who benefit from encouraging customers to switch.

But these groups don’t represent everyone.

In 2020, when acquisition only tariffs were still available and the number of customers switching suppliers was at its peak, only 20% of consumers were benefitting from the cheapest tariffs on the market, and Ofgem's own analysis has revealed that they were "more likely to be higher income, younger, male owner-occupiers." The analysis also found that only a minority were eligible for help from the Priority Services Register, which supports customers who are especially vulnerable due to disability, age, or other factors.

In an ideal world, everyone would have the time and resources to scour the market for the best available deals, but in reality the majority of people - and especially society's most vulnerable - are likely to miss out.

Acquisition only tariffs offer short-term benefits, long-term consequences

While a minority of consumers and suppliers might benefit from acquisition only tariffs in the short term, recent history has shown this to be a false economy.

Prior to the current energy crisis, a trend among some suppliers for offering unsustainably cheap tariffs to switchers created a fragile market that eventually buckled under the strain of exploding wholesale prices. When this contributed to the collapse of over thirty suppliers in 2021 and 2022, not only did the bill disproportionately fall at the feet of more vulnerable customers, but it put strain on the rest of the energy ecosystem, damaged public trust in suppliers, and raised household bills across the board.

Ultimately, allowing companies to offer unsustainable acquisition only tariffs encouraged a race to the bottom that stands to harm everyone.

A fair market can be a competitive one

In today's market, customers can still make savings from switching, and fixed-term tariffs like those offered by E.ON Next guarantee savings versus the price cap. But crucially, with the BAT in place these savings are available to everyone, and those vulnerable people who are not able to engage in the energy market aren't forced to pay for the short-term benefit of those who are.

After several years of relatively low trust in energy suppliers, research has shown that customer satisfaction is finally on the rise and the market is becoming more resilient. A fairer market can still be a competitive one, and to undermine this progress by removing the BAT now would benefit very few, and have potentially long term consequences for everyone.