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Ofgem is intending to issue a market-wide derogation allowing all suppliers to continue offering retention tariffs to their existing customers, despite new rules stipulating they must offer all tariffs to both new and existing customers.
SLC 22B, a temporary licence condition to be introduced from 14 April, prohibits suppliers from offering cheaper, exclusive tariffs to lure new customers.
During a consultation, industry stakeholders highlighted how such a move would unintentionally impact their ability to continue the practice of offering tariffs aimed at retaining existing customers, known as retention tariffs.
These are competitive rates offered to suppliers’ existing customers in reward for their continued loyalty in staying with their supplier.
In response, the regulator introduced a derogation clause to enable it to exempt any tariffs which do not affect the risks it is concerned about and can otherwise be seen as being beneficial to customers.
However, in a letter to industry stakeholders published on Friday (11 March), Ofgem’s deputy director of retail market policy, Maureen Paul, said: “Our ongoing engagement with suppliers has revealed that many are intending to submit requests for a derogation from SLC 22B for the purpose of being able to continue offering fixed retention tariffs to existing customers only.
“We therefore think that a market-wide approach would allow for a more efficient and transparent process for all concerned.”
The move means suppliers do not need to request a derogation from SLC 22B using the application form in relation to fixed retention tariffs.
Paul added that for other derogation requests not related to fixed retention tariffs, suppliers will still be required to apply to the regulator for an individual derogation.
She said: “To do so, suppliers should complete a derogation application template and explain the reasons for wanting to continue offering their specific tariff.
“Ofgem will assess these on a case-by-case basis against the policy intent and the anticipated consumer benefit,” she added.
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