PHAM NEWS | MAY 2026 Energy Matters 15
Government plans to weaken the link between gas and electricity prices
The UK government has announced a series of measures aimed at “doubling down on clean power” in response to recent energy price pressures linked to instability in the Middle East. The plans are part of a broader strategy to accelerate the transition to low-carbon energy and reduce the UK’s exposure to volatile fossil fuel markets. The government says electricity
prices remain vulnerable because wholesale prices are often still set by gas-fired generation, despite a growing share of power coming from renewable and nuclear sources. Officials said gas now sets the electricity price about 60% of the time, down from roughly 90% in the early 2020s. Under the proposals, existing
low-carbon electricity generators would be offered voluntary long-term fixed-price contracts designed to reduce exposure to fluctuating gas prices. The contracts would apply only where they represent value for consumers. There will also be an increase in
the Electricity Generator Levy from 45% to 55%. The higher rate
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Charlotte Lee says: “The move to begin decoupling electricity prices from gas is a significant step that will help unlock the UK’s transition to electrification, ensuring that low-carbon heat is the most cost-effective option, always.” Russell Dean, heat pump expert
at Mitsubishi Electric, comments: “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.” Dhara Vyas, chief executive of
will capture a greater share of what is described as extraordinary revenues earned by generators during periods of high gas prices.
Going further Further measures will be aimed at reducing household costs and expanding domestic energy supply. Grants under the Boiler Upgrade Scheme for homes using heating oil or LPG will rise to £9,000 in England and Wales. Great British Energy will also
receive support for rooftop solar projects at a further 100 schools and colleges, backed by up to £40m of investment subject to approval. Other proposals include easing installation rules for electric vehicle chargers, heat pumps and solar panels, particularly for renters and households without driveways. The proposals have been broadly
welcomed by industry stakeholders. Heat Pump Association UK chief executive
Energy UK, adds: “This 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.”
Consumer protection
Energy regulator Ofgem is to be given stronger powers to protect consumers under government plans described as the biggest overhaul of the watchdog since it was established in 2000. The plans will allow the regulator to enforce consumer law directly without going through the courts, with the aim of speeding up compensation for customers treated unfairly by suppliers. Under the proposals,
Ofgem would also gain powers to block bonuses for energy company executives who break consumer protection rules. The government said the
reforms are intended to reflect changes in the energy market, which now includes a wider range of products and services with varying levels of regulation. The updated remit will
allow Ofgem to regulate new parts of the market where it is believed stronger consumer safeguards are needed.
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