UK watchdog moves to protect energy market from wholesale price swings

Oct 16 (Reuters) - The British energy regulator Ofgem on Friday launched a consultation on activating its market stabilisation charge, to protect energy suppliers from wholesale price swings and continued market volatility during a possibly tough winter.

Here are some details from the regulator's statement:

• The mechanism protects suppliers from losses when energy prices fall sharply by compensating suppliers that bought energy in advance if customers switch to cheaper deals

• Ofgem reintroduced the mechanism in May, after wholesale energy prices soared due to the Iran conflict

• The consultation seeks views on the proposed activation and how it should operate, including trigger levels, notice periods and deactivation arrangements

• Ofgem said activating the mechanism would not automatically increase customer bills, with payments between suppliers only occurring if wholesale prices were to fall substantially

• "We're preparing for what is likely to be a difficult winter for many households," said Neil Kenward, interim director general of markets at Ofgem

• The mechanism previously operated between April 2022 and March 2024 to protect markets from price volatility triggered by the Russia-Ukraine war

(Reporting by Prerna Bedi in Bengaluru; Editing by Janane Venkatraman)