UK government plans to break gas-electricity price link
Updated
Updated · CNBC · May 6
UK government plans to break gas-electricity price link
8 articles · Updated · CNBC · May 6
UK power averaged $110.56 per megawatt hour in April, above Japan, Germany, France and the US, as ministers blamed marginal pricing for letting gas set wholesale electricity prices.
The pressure is hitting industry and households: Denby Pottery entered administration, British Steel is receiving more than £1 million a day, and households owed suppliers over £4.4 billion by June 2025.
Higher energy costs are feeding inflation and weaker spending, with food prices projected to be 50% above 2021 levels by November and retailers and housebuilders issuing profit warnings after the war on Iran began.
Renewables are the UK's cheapest power. So why do fossil fuels still dictate record-high electricity prices?
Between US tariffs and an energy crisis, is the collapse of British manufacturing now inevitable?
The UK has a new energy plan. But will it actually stop household bills from soaring this winter?
Decoupling UK Electricity Prices from Gas: Key 2026 Reforms and Their Impact on Consumers
Overview
In April 2026, the UK government launched energy reforms to protect consumers from volatile gas prices caused by the ongoing Middle East conflict, which disrupts global gas supplies and drives up electricity costs due to the UK's marginal pricing system. The reforms raised the Electricity Generator Levy to 55% on excess revenues and introduced voluntary fixed-price contracts for older renewable generators. This 'carrot and stick' approach encourages generators to choose stable revenues over exposure to gas price spikes, aiming to reduce gas's influence on electricity prices. While near-term prices may rise, these measures support a long-term transition to cleaner energy, targeting 95% carbon-free electricity by 2030 and saving households around £200 annually.