Government to abandon regional electricity pricing

9 July 2025

The UK government has scrapped plans for regional electricity pricing amid concerns it could deter investment in renewable energy and raise costs for some households.

Following an extensive consultation which started in 2022, the government has concluded that reforming the system while retaining a single national wholesale price is the right way to deliver a fair, affordable, secure, and efficient electricity system.

So-called “zonal pricing”, dropped following a recommendation from Energy Secretary Ed Miliband, would have introduced different wholesale electricity prices across the country, potentially making power cheaper in Scotland but more expensive in the south of England.

The system aimed to reflect local supply and demand more accurately and reduce the need to pay wind farms to shut down when the grid is overloaded. Supporters, including Octopus Energy boss Greg Jackson, argued it could lower overall costs and reduce the need for expensive grid upgrades. The National Energy System Operator also backed the proposal.

However, major energy firms including SSE and Scottish Power warned the change could undermine investment and lead to unpredictable pricing. Critics also raised concerns about regional disparities, with households in some areas potentially paying hundreds of pounds more.

The government’s latest proposals have been designed to ensure the benefits of clean power are felt by consumers in every part of the country, while giving businesses the stability and certainty they need to continue investing to upgrade our infrastructure.

Trevor Hutchings, chief executive of the Renewable Energy Association, comments:

“To get to an energy system that is fit for the future, we can’t rely on the policies of the past. Market reform is essential, but we know from our own membership that there are strong views on either side of the debate, and that any change can create winners and losers.

“However, it is uncertainty that dents investor confidence and I am pleased we now have further clarity. Focus now must be on growing our clean power system and, critically, bringing down the cost of electricity so that consumers feel the benefits of net zero in their pockets.”

Keith Anderson, chief executive of ScottishPower:

“This is the right decision from government as it lifts a big cloud of uncertainty over investment in the energy system. Now we will crack on with investment in the grid to deliver the goals of Clean Power 2030 – supporting economic growth and energy resilience and removing up to £5 billion of annual constraint payments by making the energy system more efficient.”

Andy Prendergast, GMB national secretary:

“The decision not to proceed with zonal pricing is long overdue and gives much-needed clarity for industries and businesses. It’s rare to find a proposal uniting so many different people — from unions to businesses and charities — against it. The consultation period has been disruptive and has delayed key investment decisions. Questions need to be asked as to why this process has taken so long to resolve.”

Chris Matson, partner at LCP Delta:

“Our analysis has shown that the impact on consumers and the energy system of this contentious policy always hinged on how it would impact investor confidence. With this decision, the zonal pricing debate can now be put to bed and industry can move forward with greater focus, investing the capital required to meet the UK’s ambitious decarbonisation targets.

“However, a core challenge remains to integrate high levels of renewable generation into a system which lacks the capacity to transmit power from areas of generation to areas of high demand. We look forward to working with policy makers on options to ensure that the energy transition delivers for all stakeholders.

Caroline Bragg, CEO of ADE:

 “The government needs to get a handle on the cost of living. But, by rejecting zonal reforms that align us with our peers, today’s decision risks higher costs. Piecemeal tweaks won’t deliver the lower bills for all that Ofgem itself says is possible. With grid costs potentially hitting £8bn by 2030, how does the status quo stop consumers footing the bill?

“Everyone knows the old system is dead. Government must now prove this won’t become a hollow victory, emboldening net zero opponents with decade-long tinkering and rising costs. Now the decision is made, ADE: Demand is ready to work with the government on the substantial pricing reforms still needed to ensure net zero actually cuts everyone’s bills.”

Nigel Pocklington, Good Energy chief executive officer:

“Zonal pricing was a threat to truly renewable tariffs and stability of investment in clean power so we’re pleased that the government has abandoned the idea. If it is committed to a fairer more affordable market then moving levies from electricity should be high on its agenda. Meanwhile a reform which would truly drive renewable investment would be fixing our broken certification system to force suppliers to evidence the amount of power they are actually buying and matching with customer demand in hourly intervals.”

Graham Pannell, spokesperson for Fairer Energy Future:

“This is good news for Britain. Reformed national pricing will ensure a fairer energy future, in which households aren’t subjected to arbitrary differences in energy costs based on where they happen to live. Reformed national pricing provides the best option for keeping everyone’s energy bills lower, supporting green jobs and investment, and realising the government’s clean power 2030 goals. We look forward to working with the Government, embracing national reform and co-designing changes that deliver real benefits for consumers across the UK.”