Martin Lewis hits out at plans to introduce new energy bills ‘penalty’

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Martin Lewis has criticised proposals from Ofgem that could make tariffs for switchers more expensive.

The energy watchdog launched a consultation on Monday over plans that could see energy firms forced to pay consumers’ old suppliers when they switch away, in a move designed to protect providers from financial losses amid soaring energy prices.

The move could come in as soon as November, as Ofgem has argued suppliers could be left out of pocket if wholesale energy rates fall sharply and people leave in large numbers.

But the MoneySavingExpert founder has said it will "dampen competition" and could push the prices onto switchers.

In a blog post, Mr Lewis said: “In a nutshell, it means if wholesale energy prices drop sharply, the cheap fixes and switcher deals offered will be a lot more expensive, in order to protect energy firms' profits.”

He described the plan to introduce a “market stabilisation charge” as a form of “switching penalty” while the supplier market remains stable.

Ofgem announced at the end of August that it would be raising the energy price cap by four per cent in October to reflect the soaring price of gas caused by conflict in the Middle East .

Neil Kenward, interim director general of markets, said the consultation came as the market was expected to grow more volatile this winter.

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“We’re preparing for what is likely to be a difficult winter for many households,” he said. “While the energy market is stronger than it was during the energy crisis, volatility remains, and the market stabilisation charge helps to protect consumers from that volatility.”

He added: “In volatile market conditions, it’s important that suppliers can continue to secure the energy their customers need without taking unsustainable risks.

“By acting now, we can help maintain a stable and resilient energy market and protect consumers from the costs and disruption that can arise when markets become unstable.”