OFGEM PROPOSES RETURN OF ENERGY SWITCHING CHARGE

Ofgem is consulting on whether to reactivate the Market Stabilisation Charge, which would require some energy suppliers to compensate rivals when customers switch. The regulator announced the consultation on Friday, 16 October. Martin Lewis, founder of MoneySavingExpert, warned that the proposal could make cheaper energy deals harder to find for millions of households. “It ain't good for consumers and I don't want it to slip under the radar,” Lewis wrote on X. Ofgem says the measure aims to protect suppliers from financial losses if wholesale energy prices fall sharply.

Under the proposal, a supplier gaining a customer could have to pay that customer's previous supplier if wholesale prices dropped more than 10 per cent below the level used to calculate the energy price cap. The payment could cover 85 per cent of the fall beyond that threshold. Lewis gave an example in which wholesale costs fell from £1,000 to £900 without triggering a payment. If they fell to £800, he said, the new supplier could owe the previous supplier £85. The proposed charge would also cover customers moving to fixed-price or other specialist tariffs.

Lewis said suppliers would probably pass the payment on through higher tariffs, reducing the savings available from switching. He described the proposal as “basically a form of switching penalty”. Lewis said he believed Ofgem had effectively decided to proceed and predicted that the charge “will almost certainly happen”. Ofgem has said the charge could return as early as November.