Britain’s energy regulator Ofgem has launched a consultation on whether to reactivate the market stabilization charge (MSC), a mechanism designed to protect suppliers from financial instability during periods of volatile wholesale energy prices. The proposal comes as the industry faces concerns about potential supplier failures this winter, with Ofgem citing risks linked to energy market fluctuations stemming from Middle East conflicts.
Under the proposed mechanism, the MSC would be triggered if wholesale prices decline by more than 10%. When activated, suppliers that gain customers by offering cheaper fixed-rate deals would be required to compensate rival companies for 85% of the wholesale price reduction. Ofgem stated the charge aims to prevent situations where suppliers face significant losses when customers switch away from default tariffs to take advantage of lower rates.
The MSC was previously in effect between April 2022 and March 2024, a period when Russia’s invasion of Ukraine caused wholesale prices to surge, resulting in more than 30 energy supplier failures. According to Ofgem leadership, while the current market conditions are stronger than during that earlier crisis, volatility remains a concern that warrants protective measures.
The proposal has drawn criticism from consumer advocates. Martin Lewis, founder of MoneySavingExpert, contends the mechanism acts as a penalty on switching behavior that would ultimately harm consumers by reducing competition and limiting the savings passed through to customers when wholesale costs fall. He questioned whether supplier protections are necessary, noting that many energy companies have achieved substantial profits since the charge was last deactivated.
Ofgem emphasized that reactivating the MSC would not automatically trigger charges or increase customer bills. The consultation seeks input on operational details including trigger levels, notice periods, and deactivation procedures. Currently, households in Great Britain are paying approximately £1,723 annually for typical gas and electricity usage in the current quarter, with further increases forecast for January.
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