Ofgem consults on switching on Market Stabilisation Charge

What Ofgem is proposing

Ofgem published a consultation on 16 October 2026 proposing to activate the Market Stabilisation Charge (MSC). The regulator reintroduced the MSC licence condition earlier in 2026 in dormant form, meaning the mechanism exists in the licence framework but is not currently switched on. The consultation sets out the case for activating it now.

Ofgem gives recent wholesale price rises as the reason for the proposal. It says gas prices have risen to around 200p per therm, about 150% above pre-conflict levels. Suppliers must buy energy in advance for price cap customers. If wholesale prices fall suddenly and customers leave the price cap in large numbers, suppliers can face unavoidable losses on energy they have already bought. The MSC is designed to address that risk. The mechanism was used during the previous gas crisis. Activating the MSC would not on its own mean any payments between suppliers. Payments would only be triggered by a 10% fall in wholesale prices.

How the charge works

Ofgem describes the MSC as a payment from a supplier that gains a customer to the supplier that loses that customer, to partly offset losses on energy already bought for that customer. Once triggered by a 10% fall in wholesale prices, the losing supplier would receive 85% of the value of the stranded hedge beyond the trigger point. The charge applies to all customers who switch supplier, regardless of which tariff they leave, including fixed tariffs as well as the price cap.

Ofgem provides illustrative figures, which it says are not predictions. The cost ranges from up to £6 to £18 per dual fuel customer across a supplier's customer base. MSC receipts range from £65 to £134 per dual fuel customer who switches. These figures show how the mechanism could operate under different conditions. They are not forecasts of what will happen. The trigger, the 85% recovery rate and the scope of the charge are the fixed elements of the proposal. The per-customer amounts depend on wholesale price movements and switching volumes.

What it means for households

Ofgem says the MSC is not an upfront cost to consumers. Households would not receive a bill for the charge when they switch. However, Ofgem expects suppliers to build it into the price of fixed tariffs. Customers who switch would likely pay more than if there were no MSC. The charge would be reflected in the tariff price rather than charged separately at the point of switching.

The costs of running the scheme would be shared by all consumers through Retail Energy Code charges. That means the administrative cost of the mechanism would be spread across the consumer base, not concentrated on those who switch. Ofgem's position is that the MSC is a payment between suppliers, not a fee paid by customers. The effect on fixed tariff prices would depend on how suppliers choose to price the risk. The consultation does not set a cap on how much suppliers could add to fixed tariff prices.

Next steps

Responses can be sent to priceprotectionpolicy@ofgem.gov.uk until 29 October 2026. Ofgem expects to decide a couple of weeks after the consultation closes, in mid-November 2026. There would be at least one full working day of notice before activation. That notice period gives suppliers and other parties time to prepare for the mechanism going live.

Ofgem expects the MSC to stay active likely at least until the end of winter. The regulator would consult before deactivating it. That means the mechanism, if activated, would remain in place through the winter period and potentially beyond, subject to a further consultation. The decision in mid-November 2026 would determine whether the MSC is switched on. If activated, payments between suppliers would still only occur if wholesale prices fall by 10% from the relevant reference point. The consultation is the current stage of the process, and the deadline for responses is 29 October 2026.

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Frequently asked questions

Is the Market Stabilisation Charge a fee paid by households?

No. Ofgem says the MSC is a payment from a supplier that gains a customer to the supplier that loses that customer. It is not an upfront cost to consumers. However, Ofgem expects suppliers to build it into the price of fixed tariffs, so customers who switch would likely pay more than if there were no MSC.

When would payments under the MSC start?

Activating the MSC would not on its own mean any payments between suppliers. Payments would only be triggered by a 10% fall in wholesale prices.

How much would the charge be per customer?

Ofgem provides illustrative figures, which it says are not predictions. The cost ranges from up to £6 to £18 per dual fuel customer across a supplier's customer base. MSC receipts range from £65 to £134 per dual fuel customer who switches.

Which customers does the MSC apply to?

Ofgem says the MSC applies to all customers who switch supplier, regardless of which tariff they leave, including fixed tariffs as well as the price cap.

What happens next and when is the deadline for responses?

Responses can be sent to priceprotectionpolicy@ofgem.gov.uk until 29 October 2026. Ofgem expects to decide a couple of weeks after the consultation closes, in mid-November 2026, with at least one full working day of notice before activation. It expects the MSC to stay active likely at least until the end of winter, and would consult before deactivating it.