How do consumers feel about acquisition-only tariffs?
The energy regulator Ofgem recently concluded a consultation on removing its ‘Ban on Acquisition-only Tariffs’ (BAT). Acquisition-only Tariffs are cheaper tariffs only available to new customers. Ofgem banned energy suppliers from offering them in April 2022 as a temporary measure to stabilise the market during the energy price crisis. Ofgem now says it wants the BAT to end in either October 2024 or March 2025.
Which? doesn’t agree that the BAT should be removed. In our view there’s still a strong case for keeping it in place to ensure that suppliers’ best tariffs remain open to both their existing and new customers. As we explain in our response to Ofgem’s consultation, removing the BAT could open the door to ‘loyalty penalty’ pricing similar to that seen in the past.
Our recent research also finds that consumers think acquisition-only pricing in energy is unfair. We ran a nationally representative survey of 2,090 UK adults to explore how consumers would feel about the practice if they encountered it in two different scenarios.
Consumers will most often come across acquisition-only pricing when they’re looking at their own suppliers’ tariffs or shopping around. If they’re looking at their own suppliers’ prices, then they might see cheaper deals which they can’t access. While if they’re looking at prices offered by different suppliers, they may see deals which they can access but that suppliers’ existing customers can’t. Consumers are more likely to feel they’re benefiting from acquisition-pricing in the second scenario, as they’re seeing deals which are only open to them as a switcher.
We tested both scenarios with consumers. Half of the sample were given a question about seeing acquisition-only pricing from their own supplier and the other half a question about seeing acquisition-only pricing from suppliers they could switch to. We then asked to what extent consumers felt the practice was fair or unfair [1].
Most consumers find acquisition-only pricing unfair, regardless of the framing
In both scenarios we find that around 8 in 10 consumers think that the situation would be either somewhat or very unfair. In the first scenario where consumers see acquisition-only deals with their own supplier, 20% of respondents said they find this somewhat unfair, and 61% very unfair. In the second scenario, where consumers see acquisition-only tariffs that they themselves could access as a new customer, 25% of respondents said they find this somewhat unfair, and 53% very unfair.
This demonstrates a weight of consumer feeling on the unfairness of the practice. Even asking about the second scenario where consumers could benefit we still find that around 8 in 10 consumers find it unfair, and only 11% think it is somewhat or very fair.
Our research fits with a pattern of findings in other surveys, where consumers have expressed strong preferences against acquisition-only pricing. Nationally representative surveys by So Energy, Octopus Energy and Eon all found that around 9 in 10 people thought that suppliers should not be allowed to offer tariffs which aren’t available to their own consumers.
The weight of public feeling alone may not be a strong enough reason in itself to retain the BAT. But it should at least be considered by Ofgem when weighing the pros and cons of BAT removal, particularly given that consumer trust in the energy sector plummeted during the energy crisis and has still not fully recovered. The energy sector has some of the lowest levels of trust in our Consumer Insight Tracker, being worse than other industries such as banking, telecoms, and water. Reintroducing a pricing practice into the market which the vast majority consumers find unfair could further damage trust.
Consumer trust in the gas and and electricity sector is still well below its levels before the energy crisis
Overall, we’re very concerned about Ofgem’s plans to remove the BAT. In our view, any benefit from reintroducing cheaper tariffs exclusively for switchers will come at the expense of those who wish to stick with their current supplier on their best deal - bringing back the loyalty penalty to the market. Furthermore, Ofgem should not be rushing to reintroduce a pricing practice that most consumers find unfair to a market with a long history of unfair pricing, low levels of trust, and major difficulties with customer service. It should instead be thinking about the bigger picture of how to create fairer forms of competition and repair the too often fraught relationship between energy suppliers and consumers [2].
Our views are set out in more detail in our response to Ofgem’s consultation on removing the BAT.
Footnotes
[1]
Yonder, on behalf of Which?, surveyed 2,090 UK adults, of whom 1,912 were jointly or solely responsible for their household’s energy bills.
953 of these were asked “Please imagine you were looking at the tariffs offered by your current energy supplier, either on their website or a price comparison website. You notice that the cheapest deal they offer is only available to ‘new customers’ and not to existing customers like yourself…How fair or unfair do you think this would be?”
And 959 were asked “Please imagine you are comparing energy tariffs offered by different energy suppliers, either on their websites or a price comparison website. You notice that the cheapest deal offered by one supplier is only available to ‘new customers’ like yourself and not to its existing customers…How fair or unfair do you think this is?”
[2]
So Energy, “found 87% agreed that existing customers should be offered the same tariffs as new ones. Only 6% disagreed with the statement. A further 79% wanted to see a replication in energy of the rules implemented by the FCA in 2022 for insurance providers.”
Octopus Energy found “In a survey run by YouGov 9 out of 10 (89%) respondents agreed that energy suppliers should offer the exact same deals to both new and existing customers.”
E.on found “We commissioned some research with YouGov to see what customers think…93% thought suppliers should not be able to restrict their best deals to new customers only. 82% of the customers YouGov surveyed said they would have less trust in their supplier if it only offered its best deals to new customers.”