Ofgem consults on activating market charge to curb UK energy volatility

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Olga Shendetskaya

16.10.2026

Ofgem consults on activating market charge to curb UK energy volatility — Ofgem eyes energy controls

Britain's energy market is heading into winter with regulators warning of continued pressure from volatile wholesale prices. Ofgem is launching a consultation on whether to activate its market stabilisation charge, a mechanism designed to shield suppliers from losses when customers switch to cheaper deals after sharp price falls.

Highlights

Ofgem opens a consultation on reactivating the market stabilisation charge, focusing on trigger rules, notice periods, and mechanism governance targeting winter market volatility.
Ofgem states the charge compensates suppliers if wholesale prices fall sharply, but emphasizes payments occur only under substantial drops, without automatically raising consumer bills.
Ofgem reintroduced the mechanism in May after wholesale prices surged following the Iran conflict, reflecting ongoing efforts to mitigate supplier risk amid geopolitical shocks.

Consultation targets winter market risks

As reported by Reuters, citing Ofgem, the regulator on Friday opens a consultation on switching on the market stabilisation charge and on the rules that would govern its use, including trigger levels, notice periods and arrangements for turning the mechanism off.

The charge is intended to protect suppliers that buy energy in advance from losses if wholesale prices fall sharply and customers move to lower-priced tariffs. Ofgem says activating the mechanism does not automatically raise household bills, because payments between suppliers would occur only if wholesale prices were to drop substantially.

Neil Kenward, interim director general of markets at Ofgem, says the regulator is preparing for what is likely to be a difficult winter for many households.

Mechanism returns after recent price shocks

Ofgem reintroduces the mechanism in May after wholesale energy prices surge following the Iran conflict, adding another layer of protection for a market that remains exposed to geopolitical shocks.

The stabilisation measure previously operates from April 2022 to March 2024, when it is used to help protect the energy market from volatility triggered by the Russia-Ukraine war. Its possible reactivation underscores how regulators are seeking to limit supplier stress and preserve competition as the UK energy sector navigates another period of uncertainty.

Our earlier coverage on geopolitical tensions and higher interest rates explained how persistent conflicts can push up energy and food prices, fuel inflation, and worsen refinancing pressures for governments. It noted that emerging and frontier markets are especially exposed because debt-service burdens are high while revenue bases are relatively narrow, leaving sovereign credit outlooks more vulnerable when shocks persist.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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