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 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 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.

MSC Programme explained

In this session, Andy Grace our Business Analyst in the Operations and Transformation at RECCo, talks about the process and progress of 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.

RECCo's role

RECCo’s role was to introduce a robust and efficient process for managing the market stabilisation charge following its introduction by OFGEM. The Scheme was introduced to the REC via Change Proposal R0034, which outlined the vires for RECCo to operate the scheme and under R0035, which set out how the administration of the scheme should operate including supplier obligations.  RECCo, with the assistance of its service providers, is responsible for collecting data, calculating and collecting the monies due, and making payments.

Invoice Schedule

The tables below show the total payments received into the scheme & the % payments out of the scheme for the current & previous invoice periods.

Invoice Period

Effective From Date

Effective To Date

Invoices Produced

Payment Due to RECCo

Payments Due to Suppliers

1

14/04/2022

10/05/2022

26/07/2022

09/08/2022

23/08/2022

2

11/05/2022

07/06/2022

26/07/2022

09/08/2022

23/08/2022

3

08/06/2022

05/07/2022

26/07/2022

09/08/2022

23/08/2022

4

06/07/2022

02/08/2022

23/08/2022

07/09/2022

21/09/2022

5

03/08/2022

31/08/2022

21/09/2022

05/10/2022

19/10/2022

6

01/09/2022

27/09/2022

18/10/2022

01/11/2022

15/11/2022

MSC Payment Details

 

Payments In To Scheme

Payments Out Of Scheme %

Total Paid Out

Invoice Period

Payments Due £

Payments Collected £

Payments %

Period 1

Period 2

Period 3+

%

£

1

0

0

0

0

0

0

0

0

2

0

0

0

0

0

0

0

0

3

0

0

0

0

0

0

0

0

REC Change Proposals

Useful Links

Two change proposals were developed and put in place in the REC Portal to support the administration of the MSC by RECCo. You can find out more information on the two changes through the REC Portal:

R0034 – Market Stabilisation Charge

R0035 – Market Stabilisation Charge – Administration

Stakeholder Events

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.

Contact

For any questions you might have or queries send us an email at info@retailenergycode.co.uk

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