Britain’s energy regulator Ofgem has launched a consultation on reinstating the market stabilisation charge, a mechanism designed to protect suppliers from financial losses during volatile market conditions. The charge, which was previously active from April 2022 to March 2024, would be triggered if wholesale energy prices decline by more than 10 percent.
Under the proposed system, suppliers that attract customers by offering cheaper fixed-rate deals would be required to pay 85 percent of the wholesale price reduction to their competitors. Ofgem indicated this approach would help prevent a repeat of the period following Russia’s invasion of Ukraine, when more than 30 energy companies collapsed due to surging wholesale costs and significant customer migration to rival firms offering better terms.
Ofgem’s interim director general of markets argued that the charge supports responsible purchasing behavior and market stability during periods of significant price volatility. The regulator stated that reactivating the mechanism would not automatically increase customer bills but would help maintain a resilient energy market.
However, the proposal has drawn criticism from consumer advocates. Martin Lewis of MoneySavingExpert characterized the mechanism as a “switching penalty” that would ultimately harm consumers by preventing them from accessing the full benefit of wholesale price reductions. Lewis questioned whether such protections remain necessary given that many suppliers have reported strong profits since the charge was last deactivated and noted that the current market appears more stable than during the earlier crisis period.
Households currently face their highest energy bills in three years this winter, with typical annual charges reaching £1,723 for the October-December period. Ofgem’s consultation seeks input on operational details including trigger levels, notice periods, and conditions for deactivating the charge.
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