\u201cWe\u2019re preparing for what is likely to be a difficult winter for many households,\u201d said Neil Kenward, the interim director general of markets at Ofgem. \u201cWhile 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.<\/p>\n
\u201cIn volatile market conditions, it\u2019s important that suppliers can continue to secure the energy their customers need without taking unsustainable risks.\u201d<\/p>\n
Under the mechanism, the MSC would be triggered if wholesale prices fall more than 10%. At that point, suppliers who win customers by being able to then offer cheap deals would have to compensate rivals 85% of the drop in wholesale rates.<\/p>\n
\u201cWhen 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,\u201d Ofgem said.<\/p>\n
When Ofgem last activated the MSC in 2022 Martin Lewis, the founder of the consumer advice site MoneySavingExpert, swore at the regulator on a press call and said the mechanism sold consumers \u201cdown the river\u201d because it would deter competition. He later posted an apology for his \u201cemotional rant\u201d<\/a> on the social media platform X.<\/p>\n Reacting to Ofgem\u2019s consultation, Lewis said on Friday that consumers\u2019 will not get as good deals if wholesale prices drop because the mechanism acts as a \u201cswitching penalty\u201d<\/a>.<\/p>\n He added: \u201cThe new supplier can\u2019t 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. The cheap fixes and switcher deals offered will be a lot more expensive, in order to protect energy firms\u2019 profits. It ain\u2019t good for consumers.\u201d<\/p>\n He questioned the need to reintroduce the mechanism, pointing out that many energy companies have made significant profits since last time it was triggered.<\/p>\n \u201cThe 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,\u201d he said. \u201cProtecting them over winter by effectively dampening competition \u2026 feels raw. I don\u2019t like it.\u201d<\/p>\n
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