Ofgem announced a consultation on 16 October 2026 on activating the Market Stabilisation Charge (MSC) as soon as November, the regulator said1. The charge makes an energy supplier compensate a rival if a customer switches before using energy the old supplier had bought in advance at high wholesale prices3.
Under the mechanism, if wholesale prices fall more than 10 per cent below the level built into the price cap and a customer switches to a cheaper tariff with a different supplier, the new supplier must pay the old one 85 per cent of the drop in wholesale rates beyond that 10 per cent1. One worked example given: if the wholesale price built into the cap is £1,000 but drops to £800, there is no charge on the first £100, and the new supplier pays the old one 85 per cent of the second £1002. The charge is likely to be added to the new bill3.
The MSC was previously in force between April 2022 and March 2024, introduced after Russia's invasion of Ukraine caused energy prices to surge2. Ofgem decided to put the power back into suppliers' licences in May so it could switch it on quickly if needed1. Ofgem said activating the MSC "would not automatically create charges or increase customer bills", but critics say it dampens competition and prevents firms lowering bills when wholesale prices fall3.
Neil Kenward, Ofgem's interim director general of markets, said:
"We're preparing for what is likely to be a difficult winter for many households."
The consultation follows a surge in wholesale energy prices and market volatility since the start of the Middle East conflict, which Ofgem says poses continued risks to consumers3. Ofgem's argument is that the price cap requires suppliers to buy energy in advance, so if wholesale rates fall sharply and people leave in large numbers, those suppliers would be left out of pocket1. The rules are intended to stop another wave of suppliers collapsing, as happened after Russia's invasion of Ukraine5.
Forecasts for the cap differ between reports. This is Money said the price cap is forecast to jump by 21 per cent to £2,084 in January3. Uswitch's Richard Neudegg said the January price cap is currently predicted to rise another 25 per cent3. MoneySavingExpert reported the January price cap is currently predicted to be 25 per cent higher than now1. The i Paper reported energy consultants Cornwall Insights have predicted the cap may climb by a further £149 a year in January 2027, and that from October the cap rose by 4 per cent, meaning a typical household pays £1,723 a year2.
Martin Lewis, founder of MoneySavingExpert, said the MSC would probably lead to smaller savings for consumers who switch supplier, and that he does not like the idea as he doubted suppliers were at risk of going bust2. He said the supplier market is "pretty stable" and he doubts "we are at the domino risk of suppliers going bust in the way they did in the early twenties"1. Richard Neudegg of Uswitch said reintroducing the charge "is not the right thing for the regulator to be doing"3.
Why it matters for households
The charge changes the economics of switching. A supplier taking on a new customer, including on a cheap fix or other specialist tariff, would have to pay compensation to that customer's old supplier if they switch1. Martin Lewis described it as "basically a form of switching penalty"5. The practical effect is that the savings available from moving to a cheaper fixed-rate energy tariff could be smaller than they would otherwise be, because the new supplier has to absorb a payment to the old one1.
For a household, that bears on how much of its bill it controls by shopping around. The price cap limits maximum unit rates and daily standing charges on default tariffs and moves with wholesale costs2. The MSC does not change the cap itself; it changes what a supplier can offer a switcher when wholesale prices fall sharply1. Ofgem's stated aim is to keep suppliers able to buy energy in advance without taking unsustainable risks, which it frames as protecting consumers from volatility3.
What happens next
The consultation opened on 16 October 2026, with the charge potentially switched on as soon as November1. No decision date beyond that has been reported. Separately, the Telegraph reported the Government is reportedly considering measures such as a temporary expansion of the Warm Home Discount, potentially raising the annual rebate from £150 to £250 for each qualifying household for the 2026-27 winter period5. Energy debts are estimated at £7bn by Energy UK5.
Sources5 sources
- Martin Lewis: 'Ofgem's plans to protect providers' profits from price swings will cost consumers', moneysavingexpert.com
- Cheaper energy deals under threat over new switching rule plan, Martin Lewis warns, inews.co.uk
- Energy regulator warns of 'difficult winter' as it proposes new switching charges that could ratchet up bills | This is Money, thisismoney.co.uk
- Energy regulator warns of 'difficult winter' as it proposes new switching charges that could ratchet up bills | This is Money, thisismoney.co.uk
- Households risk higher energy bills to protect suppliers from collapse, telegraph.co.uk