Ofgem consults on reviving a charge that makes suppliers pay the rivals whose customers they win
Ofgem is consulting on reviving a charge that would make suppliers pay rivals 85% of a wholesale price drop when they win customers from them. It applies only after a fall of more than 10%, and Ofgem says the aim is to stop suppliers going bust this winter.
The Board Room · Leadership desk
Under the proposed charge, suppliers who win customers would compensate rivals 85% of the drop in wholesale rates. It would be triggered if wholesale prices fall more than 10%. More than 30 energy companies went bust when the charge was last activated, between April 2022 and March 2024.
| Figure | Value | Note | Claim |
|---|---|---|---|
| Share of the wholesale price drop paid to rivals | 85% | 2 | |
| Trigger: price fall, over | 10% | 2 | |
| Energy companies gone bust, more than | 30 companies | When charge last active, 2022 to 2024 | 3 |
What happened
- The charge was last in force from April 2022 to March 2024, after Russia's invasion of Ukraine sent wholesale prices soaring and more than 30 energy companies went bust.
- The consultation seeks 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 October to December, £60 more than the £1,663 of the previous quarter.
Why it matters
- What it costs cost A supplier that wins customers during a price fall would pay for doing so, and Martin Lewis argues that switchers would pay in turn through dearer deals.
- What doesn't add up contradiction The sources disagree on the January rise: Cornwall Insight's £149 in the Guardian against the Independent's "almost another £300", with no forecaster named for the larger figure.
- Who has to decide decision A supplier planning cheap fixed deals for a price fall has to decide whether to price in the 85% payment before Ofgem settles the trigger and notice terms.
The proposal sets protection for suppliers that bought energy ahead against the freedom of their rivals to undercut them. Ofgem puts the exposure in specific terms. "When wholesale prices fall sharply, suppliers that have bought energy in advance for customers on default tariffs can face losses if large numbers of customers switch to cheaper fixed deals," the regulator said [4]. The Independent describes the remedy as a payment from the supplier that gains a customer through switching to the provider that lost that customer, meant to partially compensate it [7].
The Independent reported that the consultation arrives as the Iran war continues to affect wholesale markets [8]. Neil Kenward, Ofgem's interim director general of markets, said: "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." [6]
The skeptic's case comes from Martin Lewis, the founder of MoneySavingExpert. When Ofgem last activated the charge in 2022, Lewis swore at the regulator on a press call and said the mechanism sold consumers "down the river" because it would deter competition. He later apologised on X for what he called his "emotional rant" [15]. On Friday he said: "It doesn't sound a big deal, but it could be, it ain't good for consumers and I don't want it to slip under the radar." [13] He added that the cheap fixes and switcher deals offered would be "a lot more expensive, in order to protect energy firms' profits" [14].
Ofgem's reply covers less ground than his charge. It said reactivating the charge would not "automatically create charges or increase customer bills" [5], and the Independent reported that payments between suppliers would be made only if wholesale prices fell sharply enough [7]. Those statements concern whether bills rise automatically. Lewis is talking about the price of deals that suppliers choose to offer, and in our view both can hold at once. Neither source reports a measurement of what the 2022 to 2024 activation did to switching or deal prices, so the dispute cannot be settled from this record.
The decision this quarter is about settings, and the consequence arrives next quarter at the earliest. The Guardian and the Independent do not report a closing date for responses or a date for a decision. The trigger is a drop of more than 10% [2], while the price cap has just risen after higher wholesale prices [10] and is forecast to rise again in January [11]. On that path the charge would sit unused unless wholesale prices reverse.
What to watch
- Ofgem's closing date for responses and its final trigger level, notice period and deactivation terms, none of which the sources date.
- Ofgem's January price cap announcement, to see whether it lands near Cornwall Insight's forecast of £149 or the Independent's figure of almost £300.
- Any evidence from the 2022 to 2024 activation on how the charge affected switching and the price of cheap fixed deals.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence68
- Adoption
- Not scored
- Hype gap
- Not scored
- Incentives60
- Confidence70
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Ofgem has published a consultation on a proposal to reintroduce the market stabilisation charge, which aims to prevent suppliers failing if there is a customer exodus.
- [2]
Under the mechanism, the MSC would be triggered if wholesale prices fall more than 10%; suppliers who win customers by then offering cheap deals would have to compensate rivals 85% of the drop in wholesale rates.
- [3]
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.
- [4]
"When wholesale prices fall sharply, suppliers that have bought energy in advance for customers on default tariffs can face losses if large numbers of customers switch to cheaper fixed deals," Ofgem said.
- [5]
Ofgem said that reactivating the MSC would not "automatically create charges or increase customer bills".
- [6]
Neil Kenward, interim director general of markets at Ofgem, said: "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."
- [7]
The charge works by ensuring the supplier which gains a customer through switching pays a charge to partially compensate the provider that lost the customer; payments between suppliers would only be made if wholesale prices fell sharply enough.
- [8]
Ofgem launched the consultation as the Iran war continues to impact wholesale markets.
- [9]
The consultation is seeking views on how the mechanism should operate, including trigger levels, notice periods and deactivation arrangements.
- [10]
After rising wholesale prices pushed up the price cap from this month, about 22m homes are paying the equivalent of £1,723 a year for typical gas and electricity use between October and December, up from £1,663 for July to September.
- [11]
Ofgem's quarterly price cap is forecast to climb by the equivalent of a further £149 a year in January, which would put the average annual bill at £1,872.
- [12]
Forecasters are warning that power bills could soar by almost another £300 from January.
- [13]
Martin Lewis said on Friday: "It doesn't sound a big deal, but it could be, it ain't good for consumers and I don't want it to slip under the radar."
- [14]
Lewis said: "In a nutshell, it means if wholesale energy prices drop sharply, the cheap fixes and switcher deals offered will be a lot more expensive, in order to protect energy firms' profits."
- [15]
When Ofgem last activated the MSC in 2022, Lewis 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 on X for his "emotional rant".
- [16]
The October to December cap is £60 a year higher than the July to September cap.
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Sources
2 independent publishers whose own reporting we read for this story.
- independent.co.ukOfgem planning action to cushion energy firms from wholesale price swings
1 article · October 16, 2026
- theguardian.comOfgem could force energy suppliers to pay rivals if they lure customers with cheaper deals
1 article · October 16, 2026
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