UK government seeks to break influence of gas on electricity prices

To shield families from future wars, geopolitical tensions or supply shocks, the UK government has today set out new measures to reducing the impact that volatile gas prices have on the price of electricity.

This will be done by:

• Voluntary long term fixed contracts: offered to existing low-carbon generators not on fixed‑price contracts – covering around a third of Britain’s power supply. This will help protect families and businesses from higher bills when gas prices spike, with contracts offered only where they deliver clear value for money for consumers.
• An updated Electricity Generators Levy: immediate action to tax excess profits through the Electricity Generator Levy by raising the rate from 45% to 55%, ensuring an increased proportion of the extraordinary revenues generated when the gas price spikes is available to government to support businesses and households with the impacts of the conflict in the Middle East on the cost of living.

The new measures will further reduce the share of electricity exposed to gas price shocks and provide generators with the economic incentive to move on to fixed contracts not linked to volatile gas. The government is monitoring the impact of the current crisis on energy bills and will be ready to step in to provide targeted support where necessary.

Prime minister Keir Starmer said: “We need to get off the fossil fuel rollercoaster – this will make energy bills more stable and take the pressure off family budgets.

“When global gas prices spike, people here shouldn’t be picking up the tab. Our focus is simple: easing pressure on household budgets now, while building a homegrown energy system that protects families from global instability in the years ahead.”

Energy secretary Ed Miliband said: “As we face the second fossil fuel shock in less than 5 years, the lesson for our country is clear: The era of fossil fuel security is over, and the era of clean energy security must come of age. That’s why we’re doubling down on clean power, to give our country energy security and bring down bills for good.”

Gavin Smart, CIH chief executive, added: “As another international crisis starts to push energy bills even higher, it is right that the government looks to accelerate the Warm Homes Plan.

“Every piece of loft insulation or solar panel that we install helps to keep homes warmer and cheaper to power, while reducing our reliance on volatile fossil fuel markets. CIH and our members will continue to support the government with this work in these crucial months before next winter.”