The money saving expert said the proposal, which could come into effect in October, is ‘long overdue’.
Removal of the ban will – it is expercted – spark a return to competition between the major energy firms and lead to lower bills for millions if they sign up.
The MoneySavingExpert.com (MSE) founder weighed in on the proposals this morning expressing support for the potential plan.
He complained that the UK’s energy market was “broken” and Ofgem needed to do “anything possible” to stimulate competition to help lower consumer energy prices.
He explained that the current energy market does not encourage firms to compete for customers, resulting in little savings from switching tariffs.
Mr Lewis said: “In March, I was staggered when Ofgem told me ‘there is evidence that removing the acquisition-only tariff ban would benefit consumers’, but didn’t remove it ‘in case it was moving too quickly.’ I disagreed and said we should throw the kitchen sink at getting people cheaper deals. So, this is better late than never.”
Mr Lewis said in “normal times” he wouldn’t call for energy firms to be allowed to offer new customers lower prices than existing adding “yet these aren’t normal times”.
He added: “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. So, in reality, the Energy Price Cap, set up as a remedial backstop rate, is now pretty much the Price.”
In a post on the MSE website, Mr Lewis said this was the “last remaining measure” Ofgem could put in place to stabilise the energy market.
Earlier this year, the regulator scrapped the “Market Stabilisation Charge”. This required energy suppliers to pay a charge to the previous supplier for every customer that switched to it.
The charge allowed suppliers purchasing energy in advance to recover costs if wholesale prices dropped suddenly and huge numbers of customers switched away. Mr Lewis highlighted that it also acted as a deterrent for energy firms to offer highly-competitive deals, as they would have to pay a fee each time a customer switched to them.
Richard Neudegg, director of regulation at Uswitch.com, said: “Getting rid of the Ban on Acquisition-only Tariffs in October heralds good news for households seeking cheaper energy bills.
“With a final decision from Ofgem due in July, this move is a no-brainer to improve the chances of decent fixed deals in time for winter.
“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.
“Removing the ban will incentivise providers to work harder to compete for customers on price, service and choice.”
