Ofgem consults on energy market stabilisation charge

Ofgem, the UK energy regulator, has launched a consultation to reintroduce the Market Stabilisation Charge (MSC) to protect energy suppliers from extreme wholesale price volatility. The measure, which was previously active between April 2022 and March 2024, is designed to prevent supplier insolvency if wholesale prices drop sharply after companies have purchased energy at higher rates.

Under the proposed rule, if wholesale prices fall significantly, suppliers gaining customers through switching would pay a charge to compensate the losing supplier. Ofgem stated that activating the charge would not automatically increase customer bills, as payments only occur during specific market conditions to maintain stability.

However, consumer advocate Martin Lewis warned that the MSC could act as a “switching penalty,” potentially reducing the savings households realize when moving to cheaper deals. This comes as UK households face rising costs, with forecasters warning of potential increases in power bills as winter approaches.