Ofgem warns of 'difficult winter' as it proposes energy switching charge
Britain's energy regulator, Ofgem, wants to switch on a charge that makes suppliers pay a customer's old supplier if wholesale prices fall sharply, The Guardian and This is Money reported. Ofgem warned of "a difficult winter." Critics say the charge would keep cheap fixed deals from getting cheaper.
Britain's energy regulator, Ofgem, has proposed switching on its market stabilisation charge, which would make energy suppliers that win new customers pay those customers' old suppliers if wholesale prices fall sharply, The Guardian and This is Money reported. Ofgem opened a consultation on the plan on Oct. 16, and responses are due by Oct. 29, according to the regulator's website.
"We're preparing for what is likely to be a difficult winter for many households," said Neil Kenward, Ofgem's interim director general of markets, according to The Guardian and This is Money. The move follows a surge in wholesale prices and market swings since the start of the Middle East conflict, This is Money reported.
The charge would kick in if wholesale prices fall more than 10%, The Guardian reported, and suppliers that win customers with cheaper deals would have to pay rivals 85% of the drop. This is Money reported that the charge would apply if prices fall more than 10% below the price cap level. The aim is to stop suppliers that bought energy in advance from going bust if many customers leave at once, the outlets reported. The charge was last active from April 2022 to March 2024, when more than 30 energy companies collapsed, The Guardian reported.
Ofgem said turning on the charge "would not automatically create charges or increase customer bills," The Guardian and This is Money reported. Critics disagree. Martin Lewis, founder of MoneySavingExpert, called it a "switching penalty," The Guardian reported. "It ain't good for consumers," he said, adding, "I don't like it." Richard Neudegg of Uswitch said the plan "is not the right thing for the regulator to be doing," This is Money reported.
About 22 million homes are paying the equivalent of £1,723 a year for typical energy use under the current price cap, The Guardian reported.
What we know: Ofgem has proposed turning on a charge that would make suppliers pay rivals when customers switch after a sharp fall in wholesale prices.
What we don't: Whether Ofgem will go ahead after the consultation closes, and how much it could add to fixed deals.
Where outlets agree The Guardian and This is Money both report that Ofgem has proposed activating its market stabilisation charge and warned of a difficult winter.
Where they differ The outlets cited here report the same key facts so far.