Since our last newsletter in November, the Market Stabilisation Charge was triggered for gas for the first time. In this article, we give you an update on what’s happened so far and possibilities for the future.
What is the Market Stabilisation Charge (MSC)?
MSC is a charge introduced by Ofgem in April 2022, triggered when wholesale prices fall 10% below the levels assumed in the Default Tariff Cap calculations. On 14th November 2022, wholesale energy prices for gas fell low enough for the first time.
The Market Stabilisation Charge is levied upon suppliers that gain new domestic customers. This payment is then passed through to the losing suppliers, compensating them for the wholesale energy they pre-purchased but do not need for their lost customers. We've seen a historic high in wholesale prices over the past year.
Each Monday, Ofgem confirms if the MSC has been triggered and whether it continues.
Why was the MSC triggered for gas only?
Mild Autumn weather and higher-than-expected gas storage levels throughout Europe contributed to gas prices falling below the wholesale index. Consequently, the MSC for gas was triggered for three weeks following 14th November.
While wholesale gas prices have been stable throughout November, wholesale electricity prices have fallen sharply. For example, they came within 0.01% of the MSC trigger point (£427.25/MWh against a trigger point of £427.20) in the week beginning 21st November.
Will the charge remain a short-term intervention?
Scheduled to end as a temporary measure in March 2023, the charge may continue for another year. Ofgem has signalled an intention to extend to March 2024.
On 25th November, Ofgem published a statutory consultation open until 23rd December. Further news on the outcome of this can be found here: Market Stabilisation Charge dashboard | Ofgem
What is RECCo’s role in the MSC?
With the assistance of our service providers, we are responsible for administering the Market Stabilisation Charge. We collect data, calculate, and collect the monies due from suppliers, and make the correct payments. The REC Code Manager performs the calculations using industry data, and Retail Energy Code Company Limited then issues invoices.
Suppliers should have received invoices for the recent MSC trigger for gas in the week commencing 12th December.
Where can I stay up to date with the MSC?
By visiting Ofgem's Market Stabilisation Dashboard here, you can keep up to date with whether the MSC has been triggered for the week (for gas or electricity).
The Gas and Electricity Enquiry Service has been operating under the RECCo model for four months. We’re happy to say they’ve been running well, but now is the right time to review our operational processes. After review, we hope to streamline and improve the service’s efficiency.
We are now part way through mapping out the processes relating to accessing and maintaining the enquiry services. The project will conclude in February when we deliver the process maps, gap analysis and recommendations for streamlining or improvements.
The entire Code Manager and our EES Providers – Xoserve and C&C – have been involved and are determined to help us resolve any inefficiencies and make it easier to use the services.
Whilst most of our work does not directly interact with consumers, the Retail Energy Code is consumer-centric. All our work is designed to support positive outcomes for consumers – from our change process to our performance assurance framework. There are also obligations put on REC Parties and service users to work efficiently, keeping industry costs down.
The Code Manager’s service desk has seen a significant increase in contacts from worried consumers as energy costs significantly increase and temperatures drop. In most cases, other organisations – such as suppliers – are better placed to assist, but it isn’t clear to consumers where they should go.
To support consumers in the future, the Code Manager have launched a new Consumer Hub page on the REC portal. This explains their work and its impact on consumers and gives clear, upfront information about relevant and frequently discussed topics. In this area, they have also have sign-posted organisations better suited to supporting consumers with their specific concerns.
