Overview
- Ofgem has opened a consultation on reactivating the Market Stabilisation Charge, with proposals reported on Friday to make firms that win customers pay compensation to rivals when wholesale prices fall sharply.
- Under the proposed design, a gaining supplier would reimburse the losing supplier for around 85% of the drop in wholesale prices on energy the original firm had already bought for the customer.
- Ofgem says activating the charge would not automatically raise household bills and that the measure aims to reduce the risk of supplier instability caused by volatile markets.
- Consumer campaigners including Martin Lewis warn the charge could act like a switching penalty, making cheap fixed and short-term deals less attractive and reducing competition for shoppers.
- The measure was used in 2022 and remains at consultation stage now, so its final form, timing and consumer impact are undecided and will depend on Ofgem’s next policy choices.