Tuesday 21 April 2026 3:04 pm
The government is unveiling measures to decrease electricity bills
UK households could see their electricity bills fall after the government unveiled measures to end the pricing system’s relationship with volatile gas prices and fossil fuels.
Energy secretary Ed Miliband is set to overhaul the system in a major intervention to sever the link between the prices of electricity to gas, which has long been blamed for hiking bills even when cheaper renewable options are available.
The government wants to weaken the link within the next year to shield households from sudden rises in fossil fuel prices caused by global turmoil, with conflicts in the Middle East and Ukraine emphasising the UK’s exposure to international gas markets.
Under the plans, the government will expand the use of long-term fixed price contracts for renewable and nuclear generators, meaning more electricity will be sold at stable rates, believing the savings could be “significant”.
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.”
Windfall tax
Chancellor Rachel Reeves will also hike the government’s windfall tax on low-carbon electricity generators from 45 per cent to 55 per cent in order to raise funds to support consumers and businesses suffering from rising energy costs.
The so-called electricity generator levy was introduced in 2022 to target the excess profits being made by nuclear, biomass and renewable energy plants in order to combat soaring prices caused by Russia’s invasion of Ukraine.
The Government is also proposing a voluntary move by these “legacy” clean power generators, which supply around a third of Britain’s power, onto fixed-price contracts to help protect consumers from volatile prices.
Reeves claimed increasing the tax “will help break the link” and offer greater protection.
UKSIF CEO James Alexander said: “Secretary of State Ed Miliband is right that the lasting lesson of the recent energy crisis is the need to end the UK’s long-term reliance on oil and gas.
“This damaging new supply shock must be the turning point that puts the transition to a secure, clean economy well beyond doubt.
“These steps need to be put into action rapidly so both UK and global investors have the confidence to deploy billions of pounds of capital at scale.”
But shadow chancellor Mel Stride called the reforms “too little too late”.
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Speaking in the Commons, he said: “The current crisis shows how exposed we are and how damaging the Government’s net zero obsession has been to our economy, to households and to businesses.
“The Government is right to want to reduce that exposure, but is doing too little too late.
“We need an urgent change in course, not dither and delay. We need a proper, cheap power plan to get bills back down and we need it now.”
Fossil fuel security
Miliband outlined the measures at the National Growth Debate on Tuesday, vowing to “double down, not back down” on the transition to clean energy.
He said: “The era of fossil fuel security is over.”
“For Britain and so many other countries, clean energy is now the only route to financial security, energy security and indeed national security.”
Miliband also lashed out at opponents who claimed the government had gone too far in the push to clean energy, arguing they have not yet done enough.
He said:“Actually, I believe the opposite is true. In response to recent events, our actions must now be faster, deeper and more wide-ranging.”
The announcement comes as consumers face soaring prices at the petrol pumps and looming energy bill rises in the next price cap period from July, however the rise is not to be as large as originally feared.
But some industry figures have urged the government to go further in order to reduce the impact of market volatility.
Ben Martin, policy manager at the British Chambers of Commerce, said: “While wholesale prices represent a key part of energy costs, there are other major components in energy bills, including network charges and levies such as the renewables obligation.
“The Government should create parity between the levies on business and domestic bills and fund at least part of the cost of the renewables obligation for firms.
“But to drive progress towards electrification, it must be cheaper for businesses to switch to low carbon power.
Martin also called for better management of the long-term energy transition of the North Sea, including making use of domestic production for as long as the UK “remains reliant on fossil fuel imports”.
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