The Market Stabilisation Charge (MSC) will be removed in April 2024, according to an Energy UK explainer published on 12 February 2024. The charge was introduced temporarily so that a supplier losing a customer could recover some of the cost of energy it had already bought in advance for that household1.
Energy UK describes the MSC as a charge that only applies when the price of energy has fallen significantly below the price used to set the price cap. It is paid by the new supplier to the previous supplier rather than by the customer, and Energy UK compares it to an exit fee, covering some of the costs incurred in purchasing energy the customer no longer requires1.
"The MSC has been introduced temporarily to account for this issue and will be removed in April 2024."
The charge sits alongside two other temporary allowances that Energy UK says Ofgem added to the cap so suppliers could recoup costs: Backwardation, which compensates for energy bought nearer the time of use at prices above what suppliers were allowed to charge, and the Covid-19 True-up, reflecting higher customer debt and capital requirements during the pandemic. Energy UK states that Ofgem amended the cap temporarily until March 2024 to reflect the Covid costs, and that recovery of these costs has been allowed over 12 months, so costs incurred in 2022 would be predominantly recovered in 20231.
Energy UK says the wider cost recovery will last until around April 2024, meaning profits may temporarily be higher than they have been, to partially offset previous multi-year losses. It reports that on average domestic retail energy suppliers have been loss-making since the cap was introduced at the start of 2019, with losses of around £4bn according to Ofgem, and that 31 energy companies have ceased trading, adding £2.7bn in additional cost to energy bills1.
The explainer also sets out the scale of household debt. It cites Ofgem's most recent data showing customer debt and arrears in energy at a record high of around £3 billion, doubled since the start of 2020, with industry experts suggesting the true total could be much higher. It states that over one million customers are now more than £2,200 in debt without a plan in place to make repayments, and that energy bills remain around 80% higher than pre-crisis levels1.
| Item | Figure given |
|---|---|
| Supplier losses under the cap | around £4bn (Ofgem) |
| Suppliers that ceased trading | 31 |
| Added cost to bills from failures | £2.7bn |
| Customer debt and arrears | around £3 billion |
| Customers over £2,200 in debt without a repayment plan | over one million |
| Bills compared with pre-crisis levels | around 80% higher |
Why it matters for households
The MSC was never a line on a household bill. It moved money between suppliers when a customer switched, and it only bit when wholesale prices had fallen well below the level used to set the price cap. Its removal in April 2024 changes the arithmetic a supplier faces when it loses a customer, which sits behind the tariffs a household is offered and how readily suppliers compete for switchers. Energy UK's own framing is that the allowances, including the MSC, were short-term stabilisation rather than a long-term fix, and that the build-up of customer debt still needs to be tackled1.
For a household's energy independence, the practical points are the ones Energy UK quantifies: bills around 80% above pre-crisis levels, record arrears, and a supplier base that has shrunk by 31 companies. A market with fewer suppliers and heavier debt has fewer competitive offers to choose between, which matters to any home trying to control what it pays. The detail of how the charge worked, and why it ended, is set out in our guide to the Market Stabilisation Charge.
What happens next
Energy UK states the MSC will be removed in April 2024 and that cost recovery through the cap allowances will last until around April 20241. No further steps beyond those dates are set out in the explainer. The explainer does not report what, if anything, replaces the MSC, nor any change to the level of the cap itself after that point.