The Market Stabilisation Charge (MSC) expired at the end of its current extension period in March 2024, in line with Ofgem's stated intention1. The charge had been extended to protect suppliers from stability risks during the wholesale price crisis, and its removal was confirmed in Ofgem's energy price cap wholesale adjustment decision, published on 23 February 20241.
In the same decision, Ofgem confirmed it would make no adjustment to the default tariff cap for wholesale costs incurred between October 2022 and September 20231. The review covered cap periods 9a to 10b, and Ofgem concluded that suppliers' efficient costs were not systematically different from the allowances over that period1. All supplier responses to the December 2023 consultation supported not making an adjustment, while a consumer group objected, noting that the analytical approach used had changed compared to previous similar reviews1.
"We have decided to make no adjustment to the cap for wholesale costs incurred between October 2022 and September 2023, in line with our consultation position."
Ofgem also decided to proceed with technical changes to the Annex 2 wholesale cost allowance model, including a new measure called "peak relevant demand" and changes to the presentation of demand shares1. Both changes take effect from April 2024, from Charge Restriction Period 12a onwards1. The decision document records a range of supplier-level differences between incurred wholesale costs and allowances over the review period, with a weighted average of -£70 and a minimum of -£3671.
The MSC's expiry sits alongside a separate decision on the Ban on Acquisition-only Tariffs (BAT). Consumer Scotland, in its response to Ofgem's statutory consultation on the future of the BAT, noted that "there was considered to be a residual risk in removing the MSC and the BAT at the same time, hence the February 2024 decision to extend the BAT for a further year"2. Consumer Scotland stated that "with the MSC only expiring on 31 March 2024", there had arguably not yet been sufficient time to assess the impact of its removal on market conditions2.
Why it matters for households
The MSC was a charge levied on suppliers when they gained customers from rivals, designed to discourage aggressive acquisition during periods of wholesale price volatility. Its expiry means that mechanism no longer applies. For a household, the practical effect is on the wider market conditions that shape what tariffs are offered, rather than on any single bill line. The price cap remains in place and continues to limit what suppliers can charge on default tariffs1.
Ofgem's decision not to adjust the cap for the October 2022 to September 2023 period means no retrospective change to cap levels for that window. The technical changes to the Annex 2 model affect how wholesale allowances are calculated from April 2024 onwards1. The Market Stabilisation Charge and its ending are part of the broader regulatory framework that governs household energy pricing.
What happens next
Ofgem's discussion paper "Future of domestic price protection", published on 25 March 2024, set a response deadline of 10 May 20243. The paper sets out options for evolving consumer price protection, including whether the cap should remain flat, universal and stringent, or move towards time-of-use pricing, targeted protection, or market-determined approaches3. Ofgem stated it had not yet formed a view on the appropriate approach3. The introduction of Market-wide Half-Hourly Settlement from 2025 is identified as enabling greater flexibility in how households use and pay for electricity3.
Sources4 cited
- Energy price cap wholesale adjustment decision, ofgem.gov.uk
- Ofgem's Statutory Consultation on the Future of the Ban on Acquisition-only Tariffs (HTML) | Consumer Scotland, consumer.scot
- Future of domestic price protection, ofgem.gov.uk
- Future of domestic price protection, ofgem.gov.uk