Warning energy bills will stay high as Ofgem could extend rule which limits cheap deals

Households are set to face yet another year of expensive bills under rules that limit cheap fixes.

The energy regulator is reportedly set to extend rules preventing energy suppliers from offering cheaper deals to new customers until 2026. Under the rules, suppliers cannot offer the incentives unless they also offer the same deal to their existing customers.

Ofgem introduced the “ban on acquisition-only tariffs,” or BAT, during the peak of the energy crisis in April 2022. The idea was to protect the energy market and avoid a repeat of the widespread collapses of gas and firms in 2021 when around 30 suppliers collapsed due to rising wholesale gas prices.

Ofgem originally planned to scrap the BAT in October 2024, then extended that to at least 31 March 2025 - and is now planning to keep it until March 2026, according to its latest plans. The regulator says keeping the ban will stop customers from facing a “loyalty penalty” - this is where prices are hiked unless they switch away. It also noted that it would be good for customers in debt, who would otherwise be unable to switch, but who can still access cheaper deals through their current energy firm.

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However, many blame the ban for high . Ofgem’s price cap is currently £1,717 a year for the typical home and the majority of energy suppliers are offering deals around this level. Many argue that firms have “no incentive” to bring back cheaper fixed-rate deals so energy prices are not falling back to "normal levels".

MoneySavingExpert.com founder , argued the ban should be lifted so that people have access to as many cheaper deals as possible. In a statement issued at the start of the Ofgem consultation, Martin said: "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 30%, now it’s a few percent at most.”

Ofgem have also noted this in their consultation on the BAT, by saying: 'We acknowledge that removing the BAT could reduce prices for active consumers in the short-term. Our decision to retain it remains a closely balanced one.'

Richard Neudegg, of Uswitch, said that the regulator’s own analysis suggests that BAT “softens” price competition between suppliers on fixed deals which risks pushing up prices higher than they would be. Due to this, the regulator needed to take this into consideration as it has not yet found "the right balance".

He explained: “Ofgem's main argument for extending the BAT for another year is that it will promote more trust in the energy market. They seem to believe it's worth risking fixed deals being more expensive than they otherwise would be if more customers can access those deals without switching suppliers. We don't think Ofgem has yet found the right balance to strike. Even if it feels like protection, it's not helping consumers if in practice everyone ends up paying more than they otherwise would.” Ofgem will make a final decision next month.

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