Britain’s energy regulator Ofgem has launched a consultation regarding the potential reactivation of the market stabilisation charge (MSC), a mechanism designed to protect energy suppliers from market instability during periods of significant price volatility. The proposal comes as the regulator expresses concerns about the impact of energy price swings linked to Middle East conflicts and seeks to prevent supplier failures heading into the winter months.
Under the proposed mechanism, the MSC would be triggered if wholesale prices decline by more than 10%. When activated, suppliers that attract customers by offering cheaper fixed-rate deals would be required to compensate competing suppliers for 85% of the wholesale price reduction. According to Ofgem, this protects suppliers who have already purchased energy in advance for customers on default tariffs and would face significant losses if large numbers of customers switched to cheaper offerings from competitors.
The MSC was previously in effect between April 2022 and March 2024, during the period following Russia’s invasion of Ukraine, when soaring wholesale prices led to the failure of more than 30 energy companies. Ofgem officials argue that reactivating the charge would support responsible energy purchasing practices and maintain market stability without automatically increasing customer bills.
However, the proposal has drawn criticism from consumer advocates. Martin Lewis, founder of consumer advice site MoneySavingExpert, characterized the mechanism as a “switching penalty” that discourages competition and prevents consumers from fully benefiting when wholesale prices fall. Lewis questioned whether reintroduction is necessary, noting that the supplier market has stabilized and energy companies have reported strong profits in recent years. Ofgem’s consultation seeks input on operational details including trigger levels, notice periods, and deactivation procedures.
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