Households face high energy bills until 2026 under Ofgem rule to extend ban on cheap deals

The BAT’s purpose is to protect the energy market and prevent a repeat of the widespread collapses of gas and electricity firms seen in 2021. However, it has also contributed to keeping energy bills high by removing the incentive for suppliers to offer competitive fixed-rate deals.

Richard Neudegg of Uswitch said: “Ofgem’s own analysis suggests that the BAT softens price competition between suppliers on those fixed deal options, which risks pushing up fixed deal prices to a higher price than they otherwise would be.”

This lack of competition means that most consumers are left with more expensive variable tariffs limited by the Ofgem price cap. As a result, households are unable to access the cheaper fixed deals that were once common in the energy market.

Ofgem acknowledged that removing the BAT could reduce prices for active consumers in the short-term, but maintains that its decision to retain it is “a closely balanced one.”

The regulator’s decision to extend the BAT is rooted in its desire to promote trust in the energy market and protect vulnerable customers.

Ofgem argues that maintaining the BAT prevents a ‘loyalty penalty’, where existing customers face higher prices than new ones.

The regulator also believes the BAT benefits customers in debt, who can still access cheaper deals through their current supplier without switching. However, this approach has faced criticism.

Neudegg added: “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.”

The regulator has launched a consultation, open until 6th November 2024, inviting feedback from energy suppliers, consumers, and other stakeholders on the proposed extension and potential improvements to the BAT.

The BAT extension has sparked debate among industry experts and consumer advocates. While some argue it promotes market stability, others worry about its impact on competition and consumer choice.

Simon Francis, coordinator of the End Fuel Poverty Coalition, supports the BAT, and said: “With energy debt levels rising due to the record energy prices, now is not the time to allow firms to offer these tariffs, which also disadvantage existing loyal customers and risk creating market instability.”

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However, critics argue that the BAT may ultimately harm consumers by keeping prices artificially high.

The lack of competitive fixed-rate deals means households have fewer options to reduce their energy costs. This is particularly concerning as the UK grapples with a cost-of-living crisis.

As Ofgem weighs its decision, consumers are left wondering whether they will see relief from high energy bills in the near future or face another year of elevated costs.