Ofgem Considers Punishing Energy Suppliers For Making Energy Cheaper
A proposed charge could make power companies compensate rivals whenever customers are tempted by a bargain and wholesale prices later fall.
LONDON, Ofgem has opened a consultation on bringing back a market stabilisation charge. It would make suppliers with cheaper deals compensate their rivals if wholesale energy prices drop sharply.
The aim is to shield the market from competition’s more troubling side effects: people comparing prices, changing supplier, and briefly discovering that a bill can go down.
A supplier offering a low tariff could end up paying a rival if wholesale prices later tumble. Nobody, in this arrangement, is expected to bear the private burden of correctly guessing what customers want.
“If people save money, the market may experience unacceptable happiness.”
Nella Quist, director of tariff tranquillity at the imaginary Office for Responsible Bargains, said the consultation sets out a fresh consumer-protection principle. When a business cuts prices and customers like it, an invoice must be sent somewhere.
“The market must remain competitive, but only within carefully marked lanes,” Quist said from a tiny booth labelled COMPETITION, PENDING APPROVAL. “Suppliers cannot keep tempting the public with savings and then expect everyone to live with the emotional aftermath.”
The charge rests on the prospect of wholesale prices falling after customers have switched. If that happens, the supplier that gained those customers could compensate the supplier that lost them. Economists at the fictional Institute of Economically Necessary Complications called this “a fairer distribution of disappointment”.
A man standing nearby said it sounded like being fined by a supermarket because the shop next door had run out of biscuits. He was not identified. He had stopped only to read the consultation summary, then became stuck in a discussion about standing charges.
Supporters say the plan would deter aggressive offers that unsettle the market. Critics think firms will make deals worse, edge prices upward, or put every future discount in an envelope marked DO NOT OPEN UNTIL WHOLESALE CONDITIONS ARE EMOTIONALLY STABLE.
The consultation will decide whether the charge returns. Households can therefore continue hoping bills fall, with the quiet reassurance that the system has prepared another bill in case they do.