The energy regulator for Great Britain is considering the reactivation of a mechanism designed to stabilize the market during periods of significant price volatility. The market stabilisation charge, or MSC, would be triggered when wholesale prices fall more than 10%, at which point suppliers who gain customers through competitive fixed-rate offers would need to compensate their competitors for 85% of the wholesale cost reduction.
Ofgem last implemented this charge between April 2022 and March 2024, during the period following Russia’s invasion of Ukraine when soaring wholesale prices contributed to the failure of more than 30 energy companies. The regulator has expressed concern about potential market instability this winter, citing ongoing volatility linked to geopolitical tensions in the Middle East. Neil Kenward, interim director general of markets at Ofgem, stated that the mechanism helps protect consumers from volatility and ensures suppliers can continue meeting customer energy needs without taking unsustainable financial risks.
Consumer advocates have raised objections to the proposal. Martin Lewis, founder of the consumer advice site MoneySavingExpert, characterized the mechanism as a “switching penalty” that would limit the savings consumers receive when wholesale prices decline. He questioned whether reintroducing the charge is necessary, noting that many suppliers have reported substantial profits since the mechanism was last deactivated and that the broader market appears stable.
Ofgem has emphasized that activating the MSC would not automatically increase customer bills and is seeking public input on implementation details, including trigger thresholds, notification timelines, and conditions for discontinuing the charge. The consultation comes as households face elevated energy bills this winter, with typical annual costs reaching £1,723 for October through December, representing an increase from the previous quarter.
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