Ofgem plans to penalise energy firms for offering cheaper deals, and Martin Lewis warns it is a 'form of switching penalty'

Ofgem is consulting on bringing back the Market Stabilisation Charge, a mechanism that would require energy suppliers to pay compensation to competitors when they attract customers with lower-priced deals during periods of steep wholesale price declines. The regulator's interim markets chief Neil Kenward urged households to prepare for "a difficult winter" as volatility stemming from the Iran conflict continues to batter wholesale energy markets. Martin Lewis described the proposal as a "form of switching penalty" that would push the cost of cheap fixed-rate deals higher to shield energy companies' profits. The MSC was previously in force from April 2022 to March 2024, a period in which Russia's invasion of Ukraine drove more than 30 suppliers into insolvency.

The charge is triggered only when wholesale prices drop more than 10% below the price cap, at which point the supplier gaining the customer must pay rivals 85% of the difference.

Households have already absorbed a 4% energy price cap increase earlier this year, while Irish customers have faced gas bill rises of up to 11% from Yuno Energy and others.

Yuno Energy has become the third Irish supplier to freeze its prices for winter after raising them sharply in July, following PrepayPower and Electric Ireland.