Martin Lewis has warned that millions of households could find it harder to get cheaper energy deals under new plans being considered by Ofgem. The MoneySavingExpert founder has criticised the energy regulator over proposals to bring back a charge that could make switching suppliers less worthwhile for customers.
Ofgem consults on reactivating Market Stabilisation Charge
Ofgem announced on Friday, October 16, that it was consulting on reactivating the Market Stabilisation Charge, which could come into force as early as November. Under the plans, energy companies taking on new customers could be required to pay money to their previous supplier if wholesale energy prices fall sharply.
The idea is to protect suppliers from financial losses when customers leave for cheaper deals. However, Mr Lewis fears the move could leave households missing out on savings.
Lewis criticises 'switching penalty'
Writing on X, he said: "It ain't good for consumers and I don't want it to slip under the radar." He added: "In a nutshell, it means if wholesale energy prices drop sharply, the cheap fixes and switcher deals offered will be a lot more expensive, in order to protect energy firms' profits."
Mr Lewis described the proposal as "basically a form of switching penalty", arguing that companies could pass the extra costs on to customers through more expensive tariffs.
Charge triggered by wholesale price falls
The charge would only be triggered if wholesale prices fell more than 10 per cent below the level used to calculate the energy price cap. In that situation, a supplier gaining a customer could have to compensate their old provider for 85 per cent of the further fall in wholesale costs. Mr Lewis believes this would discourage companies from offering the cheapest possible deals, even when the cost of buying energy drops.
The Market Stabilisation Charge was previously used between April 2022 and March 2024, following disruption to energy markets after Russia's invasion of Ukraine. Ofgem says bringing it back could help prevent further instability during what is expected to be a difficult winter.
The regulator is concerned that suppliers buying energy in advance could face significant losses if prices suddenly fall and large numbers of customers switch away. But Mr Lewis questioned whether the protection was necessary, arguing that the energy market is now more stable than it was during the previous crisis.
The warning comes after the energy price cap rose to £1,723 a year for a typical household paying by direct debit from October 1. For now, the proposal remains under consultation, meaning households will not automatically face a new charge for switching energy suppliers.
