Ofgem has opened a consultation on whether to reintroduce the market stabilisation charge, a mechanism it says could help stop energy suppliers from going bust if wholesale prices fall sharply. Neil Kenward said the regulator is preparing for a difficult winter for many households.
The proposal would apply if wholesale prices fall more than 10%, with suppliers that win customers on cheaper deals paying rivals 85% of the drop in wholesale rates. Ofgem says the consultation is asking for views on trigger levels, notice periods and deactivation arrangements before it decides whether to reactivate the charge.
Neil Kenward on winter volatility
Kenward, Ofgem’s interim director general of markets, said: “We’re preparing for what is likely to be a difficult winter for many households.” He added: “While the energy market is stronger than it was during the energy crisis, volatility remains and the market stabilisation charge helps to protect consumers from that volatility.”
He also said: “In volatile market conditions, it’s important that suppliers can continue to secure the energy their customers need without taking unsustainable risks.” Ofgem said reactivating the charge would not automatically create charges or increase customer bills.
Market stabilisation charge terms
The charge was last activated between April 2022 and March 2024, when Russia’s invasion of Ukraine drove soaring wholesale prices and more than 30 energy companies went bust. Ofgem is now tying the proposal to winter volatility and sharp swings in energy prices linked to the conflict in the Middle East.
That makes the current consultation narrower than a blanket rule change. Ofgem is not imposing the charge now; it is asking whether the trigger should be used again, and if so, how fast it should take effect and how suppliers should be told before it does.
Martin Lewis challenges Ofgem
Martin Lewis said the proposal would make switching less rewarding for households chasing cheaper fixed deals. He said: “It ain’t good for consumers.”
Lewis also said: “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.” He added: “The cheap fixes and switcher deals offered will be a lot more expensive, in order to protect energy firms’ profits.”
Lewis said: “The supplier market is pretty stable, and I doubt we are at the domino risk of suppliers going bust in the way they did in the early 20s.” He also said: “Protecting them over winter by effectively dampening competition … feels raw.”
The consultation now puts Ofgem between two competing claims: one that the charge would cushion suppliers and consumers against volatility, and another that it would blunt the savings from switching. Whether Ofgem brings the market stabilisation charge back, and on what final terms, is the question the consultation is meant to settle.
