Ofgem Consults on Reintroducing Market Stabilisation Charge Amid Rising Bills
Proposal aims to curb supplier failures as forecasters predict nearly £300 increase in energy costs from January.
Carla Rooney
Ofgem has launched a consultation to reintroduce its market stabilisation charge.
The market stabilization charge (MSC), active from April 2022 to March 2024, now returns. Its reintroduction triggers if wholesale prices fall more than 10%, forcing the supplier gaining a customer through switching to pay a charge, partially compensating the provider that lost the customer.
Ofgem claims reactivating the MSC would not automatically create charges or push up customer bills. Payments between suppliers would only occur if wholesale prices fell sharply enough, with the MSC aiming to prevent suppliers from failing during a customer exodus.
We’re preparing for what is likely to be a difficult winter for many households.
Neil Kenward stated, "We’re preparing for what is likely to be a difficult winter for many households." He added that "volatility remains and the market stabilisation charge helps to protect consumers from that volatility."
Kenward further explained, "In volatile market conditions, it’s important that suppliers can continue to secure the energy their customers need without taking unsustainable risks." He concluded, "By acting now, we can help maintain a stable and resilient energy market and protect consumers from the costs and disruption that can arise when markets become unstable."
In volatile market conditions, it’s important that suppliers can continue to secure the energy their customers need without taking unsustainable risks. By acting now, we can help maintain a stable and resilient energy market and protect consumers from the costs and disruption that can arise when markets become unstable.
Kenward claims the MSC helps protect consumers from volatility and supports responsible energy purchasing, reducing market instability during significant price fluctuations. However, consumer advocate Martin Lewis claims that if wholesale energy prices drop sharply, cheap fixes and switcher deals would become more expensive to protect energy firms’ profits.
Lewis also claims the supplier market is currently stable, casting doubt on the immediate risk of suppliers going bust.