Plans unveiled to reduce gas influence on power bills
21 April 2026
The government is to outline plans aimed at reducing the influence of gas prices on electricity bills, in a move designed to protect households and businesses from future energy market volatility.
Energy Secretary Ed Miliband set out the proposals on Tuesday, alongside a broader push to accelerate the transition to low-carbon energy.
Currently, wholesale electricity prices in Britain are often determined by gas, despite it accounting for a smaller share of power generation. Under the existing marginal pricing system, the most expensive source used to meet demand sets the overall price, meaning fluctuations in global gas markets can drive up electricity bills.
Ministers now plan to weaken that link. A central measure involves offering long-term fixed-price contracts to existing renewable and nuclear generators not already covered by such arrangements. These generators supply roughly a third of the country’s electricity. The aim is to stabilise prices by reducing exposure to gas-driven volatility.
The government will also increase the Electricity Generator Levy from 45% to 55%, targeting what it describes as excess profits made when gas prices surge. The additional revenue will go towards households and businesses facing higher costs.
The announcement comes amid renewed pressure on energy costs linked to instability in the Middle East, following earlier disruption caused by Russia’s invasion of Ukraine. Two fossil fuel crises in less than five years have exposed the risks of the current system, where gas markets continue to influence electricity prices. Gas currently sets the electricity price around 60% of the time, down from about 90% earlier in the decade.
Ed Miliband argues that recent crises demonstrate the risks of relying on fossil fuels. He said: “The era of fossil fuel security is over, and the era of clean energy security must come of age,” adding that the government will “double down not back down” on its clean energy plans.
Further measures are expected to focus on accelerating the rollout of low-carbon technologies and expanding domestic energy generation. Proposed changes would make it easier for households, including renters and those without driveways, to install electric vehicle charging points by simplifying planning rules and allowing new cross-pavement connections. Similar steps are planned to remove barriers to fitting heat pumps, as demand for alternatives to gas heating continues to grow.
Ministers are also looking to expand renewable energy generation across publicly owned land. Brownfield sites, industrial areas and land alongside transport infrastructure such as railway lines could be used for new solar and wind projects. It is thought that these changes could unlock up to 10 gigawatts of additional capacity, enough to supply electricity to millions of homes.
The government says the reforms will gradually reduce the role of gas in setting electricity prices, with the long-term goal of creating a more stable, domestically driven energy system.
Commenting on the new measures Jess Ralston, Head of Energy at the Energy & Climate Intelligence Unit (ECIU) says:
“For years, the idea of de-linking gas and electricity prices to make the most of homegrown British renewables has been on the table, and the government is taking another step towards that which is useful for stabilising our bills. Large wind farms already lowered the wholesale electricity price by around a third last year. With around 90% of oil and gas from the North Sea already extracted, and more drilling making no significant difference to our bills or prices at the pump, clean power and electrification is clearly emerging as a way out of another fossil fuel crisis in future.”
Dhara Vyas, chief executive of Energy UK:
“The announcement promises a step change in the UK’s approach to electrification, and in fulfilling the promise of warmer homes and cheaper bills. The government has made significant progress in accelerating the supply of clean power, and it’s absolutely right that this is matched with equal ambition on demand by electrifying our homes, transport, and businesses. Electrification has the potential to transform our economy and bring the benefits of clean power to every customer in the country.
“The rapid increase in low-carbon generation is already decoupling gas from electricity prices. But the introduction of wholesale voluntary Contracts for Difference for older low-carbon generation could play a positive role in further reducing the impact of gas on retail electricity prices.”
Russell Dean, heat pump expert at Mitsubishi Electric:
“We have long called for the decoupling of electricity and gas prices as a means of allowing homeowners and businesses to see cost and energy savings from moving to heat pumps. While electricity remains more expensive than gas, this discourages investment in the technologies we need to decarbonise, cut UK emissions and future-proof the nation’s heating.
“The government’s statement on delinking the price of electricity from gas is welcome. However, this won’t fundamentally shift the market in the way that a full decoupling of electricity from gas would. This calls for even more government ambition, working with industry, to develop specific plans for how this will happen and when.”
RenewableUK CEO Tara Singh:
“We agree with the Energy Secretary that the UK’s response to global gas price spikes should be to speed up the roll-out of homegrown renewables, coupled with rapid electrification, so that we can move faster towards energy independence.
“Dampening the link between gas prices and electricity bills will help to protect households and businesses from fossil fuel volatility in the long term, strengthening the UK’s energy security.”
