Decision on changes to market stabilisation charge

Decision

Publication date

Industry sector

Supply and Retail Market

On 31 March 2022, we consulted on changes to the Market Stabilisation Charge (“MSC”) parameters to make the charge more robust in the light of continued high and volatile wholesale price levels. We also consulted on two technical changes to the MSC calculation methodology to reflect (a) our announcement of 15 March 2022 relating to price indexation in the default tariff cap (the “Indexation Guidance Letter”) and (b) electricity losses and unidentified gas.

This document outlines our decision, which has taken into consideration all stakeholder responses to that consultation. The revisions, which are being made to ensure that consumers’ interests are protected in this current unprecedented circumstances, are to:

  • Alter the parameters so that the threshold (the percentage wholesale price fall below the price cap assumptions) is reduced from 30% to 10% and the derating factor (the percentage of incremental hedging losses covered by the MSC) is increased from 75% to 85%
  • Adjust the MSC calculation to take account of the 15 March Indexation Guidance letter
  • Adjust the MSC calculation to take account of electricity losses and unidentified gas (“UIG”).

The revisions, set out in the updated Guidance document that accompanies this Decision, come into force on 25 May 2022. In the interests of transparency, we have also published an updated worked example which reflects the changes made as part of this decision.