Martin Lewis has warned households could miss out on cheaper energy deals under a proposed new Ofgem charge that could make switching suppliers more expensive.
The Money Saving Expert founder has raised the alarm after the energy regulator launched a consultation on activating its Market Stabilisation Charge as soon as next month - November 2026.
The move could have a significant impact on households hoping to cut their bills by switching to a cheaper fixed-rate tariff if wholesale energy prices fall sharply.
Martin warned the proposal was not good news for consumers and said he did not want it to “slip under the radar”.
Under the plans, energy suppliers taking on new customers could be forced to compensate their previous supplier if wholesale prices fall more than 10% below the level built into the energy Price Cap.
The new supplier could then pass some or all of that cost on to customers through higher tariffs, potentially making deals less competitive than they would otherwise have been.
Martin described the measure as “basically a form of switching penalty”.
How Ofgem's new energy switching charge could work
Ofgem decided in May to put the power to introduce the charge back into suppliers' licences, allowing it to be activated quickly if needed.
It is now consulting on switching the measure on, potentially from November 2026.
Under the proposed mechanism, if wholesale energy prices fall more than 10% below the level assumed in the Price Cap, a supplier gaining a customer who switches tariff or provider would have to pay the customer's previous supplier 85% of the wholesale price drop beyond that threshold.
Martin used a simplified example to explain what this could mean for household bills.
He said: “So very roughly, say the wholesale energy in the Price Cap costs £1,000 (a made-up number, to keep it simple. This is about proportions, not exact amounts).”
If wholesale prices fell to £900, there would be no Market Stabilisation Charge.
But if they dropped to £800, the first £100 reduction would not trigger the charge. Of the next £100 reduction, 85% – equivalent to £85 – would have to be paid to the customer's old supplier.
That could mean the new supplier charges the customer up to £85 more than it otherwise would have done, although other factors could affect the final tariff.
Martin explained: “In other words, the new supplier can’t pass a chunk of the saving from lower wholesale rates on to you, because it has to hand much of it to your old supplier.”
The figures are illustrative rather than a prediction of the exact amount any household would pay.
Important News: @Ofgem’s just launched a ‘consultation’ about switching on the Market Stabilisation Charge as soon as November. It doesn’t sound a big deal, but it could be, it ain’t good for consumers and I don't want it to slip under the radar. In a nutshell, it means if wholesale energy prices drop sharply, the cheap fixes and switcher’s deals offered will be a lot more expensive, in order to protect energy firms’ profits. That’s because any firm taking on a new customer, including on a cheap fix or other specialist tariff, will have to pay compensation to that customer’s old supplier, if they switch. It's basically a form of switching penalty. While technically this is a consultation, it’s one of those where Ofgem has made up its mind, but is required to consult - it will almost certainly happen. Below is my ‘first look’ explainer on this... ------------------------ How it works (simplified to make it easy to understand): Ofgem decided to put this power back into suppliers’ licences in May, so it could switch it on quickly if needed, and now it is trying to do just that. It means if wholesale prices drop more than 10% below the level built into the Price Cap (and remember the January Price Cap is currently predicted to be 25% higher than now), and someone switches supplier from that or any tariff, the new firm must pay the old one 85% of the drop in wholesale rates beyond that 10%. So very roughly, say the wholesale energy in the Price Cap costs £1,000 (a made-up number, to keep it simple. This is about proportions, not exact amounts): - If prices drop to £900, there’s no Market Stabilisation Charge.\ - If prices drop to £800, you get the first £100 drop, but 85% of the next £100 (£85) goes to your old supplier. So almost certainly the new firm will make you pay the difference, meaning the tariff will be up to £85 more than it would otherwise have been (other factors could affect the amount, but this is a rough illustration) In other words, the new supplier can’t pass a chunk of the saving from lower wholesale rates on to you, because it has to hand much of it to your old supplier. Why Ofgem says it’s doing this Its argument is that the Price Cap requires suppliers buy energy in advance. If wholesale rates fall sharply and people leave in large numbers, those suppliers would be left out of pocket, and it doesn’t want suppliers who did the right thing by buying energy in advance to be penalised. My View I don’t like it. This is a ‘Market Stabilisation Charge’ but the supplier market is pretty stable, and I doubt we are at the domino risk of suppliers going bust in the way they did in the early twenties. A good few energy firms have made large profits since then, and protecting them over winter by effectively dampening competition because it’s ‘not their fault’ feels raw. After all we don’t take their profits off them when they make them ‘through no fault’. Until now, my hope had been that at some point the Middle East situation would de-escalate, wholesale rates would drop. While it would take months for that to feed into the Price Cap, other cheaper tariffs would be available to switch to. That would still happen, but the savings could be no-where near as good as otherwise. ------------ As noted, these are my provisional thoughts and this has only just come out. I will need to do more looking/thinking.
— Martin Lewis (@MartinSLewis) October 16, 2026
Why Ofgem could introduce the charge
Ofgem's argument is that energy suppliers have to buy energy in advance to meet their obligations under the Price Cap.
If wholesale prices then fall sharply and customers leave in large numbers for cheaper deals, suppliers could be left paying more for energy than the market rate.
The regulator wants to avoid penalising firms that bought energy in advance and could otherwise face losses when customers switch away.
However, Martin questioned whether the measure was necessary, given the current state of the energy market.
He said: “I don’t like it. This is a ‘Market Stabilisation Charge’ but the supplier market is pretty stable, and I doubt we are at the domino risk of suppliers going bust in the way they did in the early twenties.”
He also pointed to the large profits made by some energy firms since the crisis of the early 2020s.
Martin added: “A good few energy firms have made large profits since then, and protecting them over winter by effectively dampening competition because it’s ‘not their fault’ feels raw.”
He continued: “After all we don’t take their profits off them when they make them ‘through no fault’.”
Recommended reading:
- Martin Lewis shares 'massively under-publicised' scheme that cuts council tax to zero
- Martin Lewis shares the 'bonkers' insurance trick could cut your bill in half
- Martin Lewis issues mortgage warning to anyone whose deal ends in the next year
Could energy bills come down if wholesale prices fall?
The proposal could be particularly significant if wholesale energy prices fall in the coming months.
Martin said he had been hoping the situation in the Middle East would de-escalate, bringing down wholesale prices and eventually opening the door to cheaper energy deals.
Although it can take months for lower wholesale prices to feed through into the Price Cap, suppliers can offer fixed tariffs that reflect market conditions sooner.
That could give households an opportunity to lock in a cheaper deal before the lower prices are reflected in the standard tariff.
However, Martin warned the proposed charge could reduce the savings available to people who switch.
He said: “That would still happen, but the savings could be no-where near as good as otherwise.”
The warning comes as the January Price Cap is currently predicted to be 25% higher than the current level, according to Martin's explanation.
Households considering switching may therefore be watching closely for cheaper fixed deals, particularly if wholesale prices begin to fall.
This is depressing, I had hoped it wouldn't be so dominantly 'worse'. And its not just here, the result is broadly similar across all four platforms I polled on.
— Martin Lewis (@MartinSLewis) October 20, 2026
Ofgem consultation is not yet a final decision
The Market Stabilisation Charge is the subject of a consultation, meaning the proposal is not yet confirmed as a final policy.
However, Martin suggested he believed the regulator was likely to proceed.
He said: “While technically this is a consultation, it’s one of those where Ofgem has made up its mind, but is required to consult - it will almost certainly happen.”
He stressed that his comments were provisional, as the proposal had only just emerged and required further examination.
Martin said: “As noted, these are my provisional thoughts and this has only just come out. I will need to do more looking/thinking.”
Share