Ofgem Weighs Reintroducing Market Stabilisation Charge on Energy Suppliers

Ofgem is considering reintroducing a market stabilisation charge that could force energy suppliers to pay rivals when they lure customers away with cheaper deals, the regulator has confirmed. The measure is being weighed as a way to prevent firms from going bust, according to the Guardian.

Under the mechanism, a supplier that wins customers from a competitor through cheaper tariffs would make a payment to the rival it has taken business from. The charge is designed to discourage aggressive price competition that can leave suppliers exposed to losses and, ultimately, failure.

The regulator for Great Britain is assessing the option as part of its oversight of the retail energy market. The proposal echoes an earlier version of the charge that was used in the sector before being withdrawn. Ofgem's review signals concern that a renewed wave of customer switching toward cheaper deals could destabilise suppliers with thinner financial buffers.

The potential return of the charge is likely to be closely watched by both suppliers and consumer groups. For suppliers, it would alter the economics of competing on price, reducing the incentive to undercut rivals if doing so triggers a payment. For consumers, the concern is that the mechanism could dampen competition and limit the availability of the cheapest tariffs.

The source did not specify a timetable for a decision or detail the size of any payments that would be required. Ofgem's deliberations remain at the consideration stage, with no final proposal confirmed.