Ofgem's proposed switching charge: how it would work and what it means for bills

On 16 October 2026, Ofgem opened a consultation on whether to reactivate the market stabilisation charge (MSC), a mechanism under which a supplier that gains a customer by offering a cheaper deal would have to compensate the supplier that loses that customer, but only when wholesale energy prices fall sharply.

How the mechanism would work

Under the proposal, the charge would be triggered once wholesale prices fall more than 10% below the level built into the regulator's price cap. Once that threshold is crossed, a supplier that attracts a customer with a cheaper tariff would have to pay the losing supplier 85% of the difference between the wholesale price and the threshold, according to the consultation.

Why Ofgem is acting now

Neil Kenward, Ofgem's interim director general of markets, said the regulator was preparing for a winter that is expected to be difficult for many households. The energy price cap rose 4% from 1 October 2026, and some forecasts cited in coverage of the announcement point to a further increase in average bills by January 2027.

Ofgem argues suppliers can be left financially exposed when they have bought energy in advance for existing customers at a higher price, only for wholesale prices to then fall and rivals to undercut them with new, cheaper offers built on the lower price. The regulator says the charge is meant to stop that exposure from pushing suppliers towards insolvency.

What happened the last time the charge was used

The MSC is not new. Ofgem first introduced it in February 2022, at the start of the energy crisis triggered by Russia's invasion of Ukraine, saying the charge was meant to stop suppliers that had already bought energy in advance from being penalised, while still allowing switching customers to benefit from cheaper tariffs. The charge then operated from April 2022 until March 2024, a period in which more than 30 energy suppliers in Great Britain collapsed.

Does it mean higher bills for switchers?

Ofgem says reactivating the charge would not automatically lead to increased costs for consumers, because payments between suppliers are only triggered if wholesale prices fall sharply enough, and the charge does not apply to the regulated price cap itself.

Martin Lewis, founder of MoneySavingExpert.com, has disputed that the measure is cost-free for consumers. He said that if wholesale prices drop sharply, cheap fixed-rate deals and switching offers would become noticeably more expensive, because a new supplier would have to pass part of its savings to the customer's previous supplier rather than passing all of it on in a lower price.

Lewis has also argued the current market differs from 2022, when the charge was first justified by a wave of supplier collapses; he says suppliers are currently more financially stable, making the case for the charge less clear-cut.

What happens next

Ofgem's consultation, open to domestic suppliers, price comparison sites and consumer groups, is seeking views on the trigger threshold, notice periods before the charge takes effect, and arrangements for switching the charge off again. The consultation is due to close on 29 October 2026, after which Ofgem is expected to decide whether, and in what form, to reactivate the charge before winter.