Market Stabilisation Charge
What is the Market Stabilisation Charge (MSC)?
From 15 December 2021 to 17 January 2022, Ofgem 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.
On 16th February 2022, Ofgem published a decision document to introduce two measures which they believe are in consumers’ interests. This includes a requirement for suppliers to pay a Market Stabilisation Charge (MSC) when acquiring new customers.
The MSC is a charge which is to be levied on suppliers who gain customers through switching. The collected payments will be distributed amongst suppliers who lose customers and is intended to compensate a proportion of the economic loss and insulate the market from the destabilising effects of a significant change in the price of wholesale energy.
The MSC is a £ per kWh charge which Ofgem will determine on a weekly basis. When a customer switches to a new supplier, the MSC in effect at the time of the switch is multiplied by the customer’s annual consumption and the gaining supplier pays that amount into the scheme. The collected monies will then be distributed amongst the suppliers who have lost customers.
MSC Project explained
In this session, Andy Grace our Business Analyst in the Operations and Transformation at RECCo, talks about the Market Stabilisation Charge, or MSC, project.
Who is affected by the MSC?
Energy Suppliers of Domestic customers will be subject to the charge when they gain customers and will receive a payment when they lose customers.
What is RECCo's role?
RECCo’s role is to introduce a robust & efficient process for managing the market stabilisation charge when it is introduced by OFGEM. The Scheme will be introduced to the REC via Change Proposal R0034 which outlines the vires for RECCo to operate the scheme and R0035 will set out how the scheme will operate including supplier obligations. RECCo, with the assistance of its service providers and the REC Code Manager, will be responsible for collecting data, calculating and collecting the monies due, and making the payments. RECCo has established a project to ensure requirements on Suppliers are met through RECCo’s role in administering the scheme.
This project has been separated into 4 workstreams:
Workstream 1 – Regulatory & Legal
This workstream is focused on the two REC Change Proposals which are required to firstly bring the scheme into operation within the REC & secondly to cover the administration of the scheme by RECCo. Change Proposal R0034 will introduce the vires for RECCo to operate the scheme and R0035 will set out how the scheme will operate including supplier obligations.
Workstream 2 – Data
The data workstream is looking at how we obtain the data required to operate the scheme in an accurate and timely manner. It is focusing on what data is required, when it is required and what will be the best source to obtain the data from and in what format.
Workstream 3 – Process
This workstream is focusing on mapping the end-to-end process for running the scheme and putting in place all the business processes and IT systems to support the end-to-end process in the most efficient way. This involves capturing and analysing all the requirements, designing, and building the best solution to meet these requirements and testing that everything works as expected.
Workstream 4 – Stakeholder Engagement
The Stakeholder Engagement workstream is focussing on how we engage best with stakeholders impacted by the scheme. This will involve specific Stakeholder sessions at key points and regular updates on the RECCo website and in the RECCo newsletter. RECCo and OFGEM will work closely together to deliver a joint Stakeholder Engagement plan with RECCo being the key point of contact.
REC Change Proposals
MSC Walkthrough Session
The Code Manager and RECCo invited REC Parties and Stakeholders to a walkthrough of the proposed Market Stabilisation Charge (MSC) arrangements on 22 April 2022, held virtually via Teams.
In this session, we explained the approach taken in developing the necessary legal drafting of two REC Change Proposals, R0034 and R0035, being progressed to introduce this scheme.
This event aimed to support REC Parties responding to the Initial Assessment and Consultation phases for R0035, and provided the opportunity to raise questions with the Code Manager, RECCo, and Ofgem. Watch the recording here. If you have any queries, please contact us.
MSC Change Proposal Progress
RECCo and the Code Manager hosted a second session on 23 May 2022 to provide an update on the progress of the Market Stabilisation Charge (MSC) Change Proposal and what has changed since the last session, held on 22 April 2022.
This session provided an opportunity to discuss the changes that have been made to the solution and legal text following the Impact Assessment window closure, and for REC parties to ask questions to our MSC experts, supporting the development of Consultation responses.
Project Updates - Progress
Stay informed on the progress of the MSC Programme with our Plan on a Page (PoaP). It includes current workstreams and timelines for the Market Stabilisation Charge Project.