Decision on short-term interventions to address risks to consumers from market volatility
From 15 December 2021 to 17 January 2022, we consulted on a range of potential temporary measures to enable domestic suppliers to better manage risks created by current wholesale market volatility, which could lead to higher costs for consumers in the event of further significant supplier exits from the market.
This document describes our decision to introduce two measures on 16 February 2022 that, after consultation, we believe are in consumers’ interests. These are as follows:
- A requirement for suppliers to make all tariffs available to new and existing customers
- A requirement for suppliers to pay a Market Stabilisation Charge when acquiring new customers if wholesale prices fall below a set threshold. When consumers switch, the new supplier would have to pay this fee to the old provider if wholesale energy prices fall significantly. This will help reduce the risk of costly supplier failures and make sure firms buying energy in advance for their customers aren’t penalised if wholesale prices fall sharply.
These measures will come into effect on 14 April 2022 on a temporary basis, to address the risks to consumers in the short term from ongoing wholesale market volatility, in advance of enduring reforms coming in later this year. On 4 February 2022 we launched a consultation on changes to the price cap methodology that will enable better handling of market volatility on an enduring basis, while continuing to protect consumers.
*In addition to the guidance issued, on 25 February 2022 we also published a worked example of the Market Stabilisation Charge.