Ofgem, Britain's energy regulator, is consulting on reintroducing a market stabilisation charge (MSC) that would require suppliers to pay rivals when they win customers with cheaper deals.
The regulator published the consultation proposal on Wednesday. The charge aims to prevent energy suppliers from going bankrupt if they experience a sudden customer exodus, according to Ofgem's stated concern about the impact of volatile energy prices linked to the Middle East conflict.
Under the proposed mechanism, a supplier that attracts customers by undercutting competitors would owe payments to other firms in the sector. The logic is to reduce the financial shock to suppliers who lose market share during periods of price volatility.
Ofgem framed the proposal as a safeguard against supplier failures this winter. The regulator expressed worry that sharp swings in energy prices could destabilise the market and trigger insolvencies.
The MSC is not new. Ofgem previously used versions of this charge. The current consultation signals the regulator's intent to bring it back as energy prices remain subject to geopolitical shocks and seasonal demand swings.
The proposal sits at the intersection of two competing objectives. Regulators typically favour price competition as a mechanism to protect consumers. A charge that penalises suppliers for winning customers with lower prices works against that incentive. However, Ofgem's priority appears to be preventing bankruptcy cascades in a market where thin margins and price volatility create genuine insolvency risk.
The outcome depends on consultation responses from suppliers, consumer groups and other stakeholders. Ofgem did not announce a decision date, only that it was weighing the proposal.