Energy suppliers could be forced to pay a charge to rivals if they lure customers with cheaper deals, as the industry regulator for Great Britain attempts to prevent suppliers going bust this winter. Ofgem has published a consultation on a proposal to reintroduce the market stabilisation charge (MSC), which aims to prevent suppliers failing if there is customer exodus, as it frets over the impact of sharp swings in energy prices linked to the conflict in the Middle East. The charge was last activated between April 2022 and March 2024, when Russia’s invasion of Ukraine sparked soaring wholesale prices that caused more than 30 energy companies to go bust.
At that point, suppliers who win customers by being able to then offer cheap deals would have to compensate rivals 85% of the drop in wholesale rates. When Ofgem last activated the MSC in 2022 Martin Lewis, the founder of the consumer advice site MoneySavingExpert, swore at the regulator on a press call and said the mechanism sold consumers “down the river” because it would deter competition. He later posted an apology for his “emotional rant” on the social media platform X.
Reacting to Ofgem’s consultation, Lewis said on Friday that consumers’ will not get as good deals if wholesale prices drop because the mechanism acts as a “switching penalty”. He added: “The new supplier can’t pass a chunk of the saving from lower wholesale rates on to you, because it has to hand much of it to your old supplier. The cheap fixes and switcher deals offered will be a lot more expensive, in order to protect energy firms’ profits.
It ain’t good for consumers.” He questioned the need to reintroduce the mechanism, pointing out that many energy companies have made significant profits since last time it was triggered. I don’t like it.” Ofgem said that reactivating the MSC would not “automatically create charges or increase customer bills”. The consultation is seeking views on how the mechanism should operate, including trigger levels, notice periods and deactivation arrangements.
About 22m homes are paying the equivalent of £1,723 a year for typical gas and electricity usage between October and December, up from £1,663 for the July to September period. Ofgem’s quarterly energy price cap is forecast to climb by the equivalent of a further £149 a year in January, according to energy consultants at Cornwall Insight, which would put the average annual bill at £1,872. The chancellor, John Healey, is planning a major intervention to cut energy bills for poorer households in this month’s budget.
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