Economy · Article
Ofgem Proposes Reviving Energy Market Stabilisation Charge for Winter 2026
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In brief
Ofgem is consulting until 29 October 2026 on reactivating its Market Stabilisation Charge, which would require a supplier that wins a customer with a cheaper deal to pay the losing supplier up to 85% of any wholesale price fall above 10%. Ofgem says reactivation would not automatically raise bills, while consumer advocate Martin Lewis has described the mechanism as effectively a penalty on switching suppliers.
What Ofgem Is Proposing
Britain's energy regulator Ofgem has opened a consultation on reactivating the Market Stabilisation Charge (MSC), a licence condition first introduced in 2022 that lapsed in March 2024 and has remained inactive since. Under the mechanism described on Ofgem's consultation page, when a household switches supplier, the supplier that gains the customer pays the supplier that loses the customer a sum designed to partially offset losses on energy the losing supplier had already bought in advance.
Ofgem's consultation, published on 16 October 2026 and open until 29 October 2026, sets out proposed trigger conditions. According to a report by AOL that cites the consultation, the charge would activate only if wholesale gas and electricity prices fall by more than 10%, and the supplier winning the customer would then have to pay 85% of that wholesale price drop to the supplier it took the customer from.
According to Brit Brief's report citing Ofgem, reactivating the licence condition would not automatically create charges or push up customer bills: payments between suppliers would only be triggered if wholesale prices fell sharply enough to meet the threshold ultimately agreed.
Why the Regulator Is Acting Now
The consultation lands as Ofgem's domestic energy price cap rose by 4% from 1 October 2026 to £1,723 a year for a typical dual-fuel household paying by direct debit, according to AOL's report on the consultation. The news site Brit Brief, citing Ofgem, linked the renewed volatility to the ongoing conflict involving Iran, which it said continues to unsettle wholesale gas and electricity markets, and reported forecasts that household bills could rise by close to £300 from January 2026.
We're preparing for what is likely to be a difficult winter for many households.
On its own consultation page, Ofgem frames the rationale in similar terms, explaining that a sharp fall in wholesale prices during a period of high and volatile prices can threaten market stability, and that the MSC is intended to support stability and continued investment by suppliers if large numbers of price-cap customers were to switch away following a sudden price drop.
A Mechanism With a History
The Market Stabilisation Charge is not new. Ofgem first introduced it on 16 February 2022, alongside a separate Equal Tariff Requirement obliging suppliers to offer existing customers the same deals available to new ones, responding to what the regulator described at the time as an exceptional, decades-level surge in global gas prices, according to Ofgem's original 2022 press release.
Brit Brief reported that the charge was in force from April 2022 to March 2024, covering the period that followed Russia's invasion of Ukraine. AOL's report noted that more than 30 energy suppliers failed during that Ukraine-related crisis, a point Martin Lewis, founder of MoneySavingExpert.com, raised when questioning whether reactivation is necessary now, given that supplier profitability has since improved.
| Aspect | Detail |
|---|---|
| Trigger threshold | Wholesale prices fall by more than 10% (per AOL) |
| Supplier-to-supplier payment | Winning supplier pays 85% of the wholesale price drop to the losing supplier (per AOL) |
| Consultation period | 16–29 October 2026 (Ofgem) |
| Previous MSC period | April 2022 – March 2024, during the Ukraine-related energy crisis (Brit Brief) |
| October 2026 price cap | £1,723/year typical direct-debit dual-fuel bill, up 4% (AOL) |
What It Could Mean for Switching and Bills
Martin Lewis described the proposed charge as effectively a penalty on switching suppliers, arguing, as AOL reported, that if wholesale prices drop sharply, the discounted fixed and switcher deals suppliers can offer would end up more expensive than they otherwise would be, because part of the saving has to be handed to the customer's previous supplier rather than passed on to the household.
Ofgem has not disputed that characterisation of the mechanics but maintains, according to Brit Brief's report, that the charge only moves money between suppliers when wholesale prices fall sharply and does not by itself create new charges for consumers outside that scenario. The regulator is asking suppliers, consumer groups, charities and third-party intermediaries for views on the exact trigger level, the notice period before the charge takes effect, and how it would eventually be switched off.
What Happens Next
Ofgem's consultation closes on 29 October 2026, with responses to be emailed to the regulator's price protection policy team. Ofgem has not published a firm date for a final decision on whether, and under what thresholds, the Market Stabilisation Charge will be reactivated for this winter.
Questions
- What is Ofgem's Market Stabilisation Charge?
- It is a licence condition under which a supplier that gains a customer through a cheaper deal pays part of that saving to the supplier that loses the customer; in the 2026 proposal that payment would be up to 85% of the relevant wholesale price fall, according to Ofgem's consultation and a report by AOL.
- When would the charge actually apply?
- Under the proposal described by AOL, it would only activate if wholesale gas and electricity prices fall by more than 10%; smaller price movements would not trigger it.
- Will my energy bill go up because of this charge?
- According to Brit Brief's report citing Ofgem, reactivating the charge would not automatically create payments or raise bills; supplier-to-supplier payments would only occur if wholesale prices fall sharply enough to meet whatever threshold is finally set.
- Why is Ofgem doing this now?
- Ofgem points to continued volatility in wholesale energy markets, which Brit Brief linked to the Iran conflict, coming as the October 2026 price cap rose 4% to £1,723 a year and ahead of what Ofgem's Neil Kenward called a potentially difficult winter, per AOL.
- Has this charge been used before?
- Yes. Ofgem introduced it in February 2022 during the gas-price surge of that period, and Brit Brief reported it was in force from April 2022 to March 2024, during the Ukraine-related energy crisis in which, per AOL, more than 30 suppliers failed.
Sources
- Ofgem — Market Stabilisation Charge activation (consultation)
- Ofgem — Update on stabilising the energy market (2022 press release)
- AOL — Ofgem could force energy suppliers to pay rivals if they lure customers with cheaper deals
- Brit Brief — Ofgem consults on reintroducing market stabilisation charge to protect suppliers amid Iran war volatility
This piece was prepared with artificial intelligence and passed an automated source check before publication. If you see an error, ask for a correction. Request a correction or reply · How we make this
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