Reflecting on the conclusion of the Market Stabilisation Charge

In October 2023, Ofgem announced that it would allow the Market Stabilisation Charge (MSC) to lapse after the 31st March 2024. Now that the settlement process has ended, we want to take the opportunity to highlight key information for Suppliers and reflect on the scheme’s success.

Understanding the Market Stabilisation Charge (MSC)

The MSC was initially introduced in February 2022 to manage the risks created by wholesale market volatility, which could lead to high consumer costs if suppliers left the market. The scheme rules mandated domestic Suppliers acquiring customers to pay charges which RECCo distributed to domestic Suppliers who had lost customers when wholesale prices significantly dropped below the prescribed wholesale price cap index.

Closure of the scheme

The settlement process for the Market Stabilisation Charge (MSC) is ending. The final invoices were issued on 19th April 2024, and the final payments will be made to Suppliers on 17th May 2024. These payments encompass eligible switches between March 6th, 2024, and March 31st, 2024.

Post-closure, the invoicing process will be thoroughly reviewed to ensure accuracy, especially considering events such as the Major Switching Incident in July 2023. Suppliers will receive updates if corrective invoicing becomes necessary. Suppliers retain the option to dispute individual invoices or credit notes in accordance with REC Schedule 22.

Why did Ofgem decide to retire the Market Stabilisation Charge?

Ofgem has published this document detailing their decision in full. They state that the MSC was a temporary measure that would only be retained for as long as it was in the interest of consumers. They continue, “Our view is that market risks that the MSC is designed to mitigate, around instability and volatility, are now markedly less…As we are slowly seeing competition re-emerge in the markets, the MSC is reducing incentives for existing Suppliers to compete and potentially acting as a deterrent for new Suppliers to enter the market.”

What was “RECCo’s role in the Market Stabilisation Charge?

We played a vital role in facilitating the MSC, quickly implementing the governance and charging arrangements necessary for the scheme’s operation. Additionally, we developed an efficient invoicing and billing mechanism, ensuring a cost-effective solution for REC Parties. This was successfully delivered within a tight four-month timeframe, which is a testament to the close collaboration between RECCo, the REC Code Manager and Ofgem.

RECCo collected and paid out in excess of £80 million during the scheme’s lifetime. Except for MSC Invoice Period 10, we issued all invoices and payments to Suppliers on time. The events that led to the period 10 delay are detailed in our newsletter of February 2023  and reflect our ability to be pragmatic and flexible to retain the scheme’s integrity when faced with an unexpected scenario. Following this, we built in further checks so that similar situations could be picked up earlier. Additional lessons that we learned is that Suppliers would have appreciated greater transparency of the data the Central Data Service Providers had provided us with to carry out the calculations. We will ensure that such transparency is considered and built into the design of future similar activities.

We’d like to thank suppliers for their cooperation with the scheme.

By reflecting on the MSC’s conclusion, stakeholders can gain insights into its future efficacy and implications for the energy market.

Further information

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