Britain’s energy regulator, Ofgem, has launched a consultation on reactivating the market stabilisation charge (MSC), a mechanism designed to protect suppliers from financial instability during periods of significant wholesale price fluctuations. The charge would require suppliers that attract customers through cheaper deals to compensate competing firms, specifically when wholesale prices drop by more than 10 percent. Under the proposed structure, suppliers offering lower-priced fixed-term contracts would need to transfer approximately 85 percent of wholesale cost savings to their rivals.
Ofgem has cited concerns about market volatility linked to international geopolitical developments as justification for the measure. The regulator notes that when wholesale prices decline sharply, suppliers who purchased energy in advance at higher rates face potential losses if large numbers of customers switch to competitors offering cheaper deals. Neil Kenward, interim director general of markets at Ofgem, stated that the mechanism would help suppliers secure energy for their customers without taking excessive financial risks during volatile conditions.
The MSC was previously active between April 2022 and March 2024, following Russia’s invasion of Ukraine, which triggered sharp rises in wholesale costs and contributed to the failure of more than 30 energy companies. Ofgem indicated that reactivating the charge would not automatically increase customer bills, and the consultation is seeking input on operational details including trigger thresholds, notification procedures, and deactivation criteria.
Consumer advocates have expressed skepticism about the proposal. Martin Lewis, founder of consumer advice website MoneySavingExpert, characterized the mechanism as a switching penalty that would prevent consumers from receiving full benefits when wholesale prices decline. He questioned whether market conditions warrant such protections, noting that many suppliers have achieved substantial profits since the mechanism was last deactivated. The consultation seeks public feedback on how the MSC should function if implemented.
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