Major energy bill update as Government acts to break gas influence on prices (Image: Getty)
Households and businesses across the country are set to be better protected from energy crises, as the Government moves to break the link between gas and electricity prices. New plans announced on Tuesday include long‑term fixed‑price contracts for renewables, and immediate action to tax excess profits through the Electricity Generator Levy, raising the rate from 45% to 55% and extending its duration.
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.”
Read more: British Gas warns customers could be charged someone else’s bill
Read more: MSE message to 1.6 million homes amid energy bill concerns
The Energy Secretary announced several other measures today at the Good Growth Foundation (Image: Getty)
The Government said that instability in the Middle East has shown that Britain’s reliance on international fossil fuel markets leaves families and businesses exposed to volatile gas prices. To shield families from future crises, it is setting out new measures to ‘break the link’ and reduce the impact that volatile gas prices have on the price of electricity.
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.”
Under the new plans, the Government is introducing voluntary long-term fixed-price contracts for existing low-carbon generators not on fixed‑price contracts – a third of Britain’s power supply.
At the same time, ministers confirmed ‘immediate action’ on the Electricity Generator Levy, increasing the tax rate on excess profits from 45% to 55%. The move is intended to ensure that a larger share of windfall revenues earned when gas prices spike can be redirected to support households and businesses struggling with the cost of living.
Chancellor Rachel Reeves added: “Hardworking British families and businesses should not bear the brunt of global gas price shocks while electricity generators are making exceptional profits.
“Alongside moving generators onto the competitive pricing assured through wholesale Contracts for Difference, increasing the EGL to 55% will help to break the link between high gas prices and high electricity prices – offering households and businesses stronger protection against future energy shocks.”
Speaking today at the Good Growth Foundation, the Energy Secretary set out further measures. These include increased grants for households using heating oil and LPG, with support under the Boiler Upgrade Scheme rising to £9,000 to help switch to electric heating systems.
Additional investment will also go towards improving energy efficiency in social housing, expanding rooftop solar installations on schools and public buildings, and unlocking public land for renewable energy projects such as solar farms and wind turbines.
Planning rules are set to be overhauled to speed up grid connections and remove barriers to new clean energy developments, while further proposals aim to make it easier for households, including renters and those without driveways, to install electric vehicle chargers, solar panels and heat pumps.
In addition, the government has announced it will be allocating £90 million to support the development of heat pump factories across the UK, expected to create around 2,000 jobs.
Richard Neudegg, director of regulation at Uswitch.com, said about the news: “Household electricity bills can be held hostage by market gas prices because of how the wholesale market works, which can cause real pain in periods of market shock, which we have seen during global conflicts like Ukraine and now Iran.
“Weakening and eventually breaking the link between the cost of gas and the price we pay for electricity is an important goal for the government, but that doesn’t mean it will be easy or quick to do.
“Moving older renewable energy generation onto fixed-price contracts will make a difference, but these generators will have to be encouraged to make this shift voluntarily.
“Amending the taxes on electricity generators’ profits in situations where the gas price is high might convince some generators to agree new pricing arrangements, or at least give the government more funding to help out vulnerable households
“We welcome these moves as a step towards bringing down energy prices, but households can’t bank on this happening quickly. For most households, the best way to cut their bills right now is to ditch the price cap and get a decent fixed-rate deal, protecting themselves from bill hikes ahead of winter.”