Britain’s energy regulator Ofgem has launched a consultation on reactivating the market stabilisation charge, a mechanism designed to prevent supplier failures amid volatile energy markets. The charge would be triggered when wholesale prices fall more than 10%, requiring suppliers that win customers through competitive fixed-rate deals to compensate rivals for 85% of the wholesale rate decline.
Ofgem previously implemented this charge between April 2022 and March 2024, following Russia’s invasion of Ukraine, which caused severe energy price volatility and resulted in over 30 supplier bankruptcies. The regulator has expressed concern about current market instability linked to Middle East-related geopolitical tensions affecting energy costs. Officials argue the mechanism protects both suppliers and consumers by maintaining market stability and reducing the risk of widespread company failures.
However, the proposal has drawn criticism from consumer advocates. Martin Lewis, founder of MoneySavingExpert, contended that the charge effectively functions as a “switching penalty” that discourages competition and prevents consumers from fully benefiting when wholesale prices decline. He questioned whether the measure is necessary, noting that many suppliers have achieved substantial profits since the charge was last deactivated and that the market currently appears relatively stable compared to conditions in the early period following the Ukrainian crisis.
Ofgem emphasized that activating the mechanism would not automatically increase customer bills. The consultation seeks input on operational details including trigger levels, notice periods, and deactivation criteria. The regulator framed the charge as supporting responsible energy purchasing practices and maintaining a resilient market during volatile periods.
Energy bills have risen significantly for households, with approximately 22 million homes now paying £1,723 annually for typical usage this quarter, up from £1,663 in the previous period. Consultancy forecasts project further increases next month, while the government is preparing separate interventions to assist lower-income households with energy costs through the upcoming budget announcement.
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