Britons could save on soaring bills as ministers plan to end link between gas and electricity prices
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UK Electricity-Gas Price Decoupling aims to reform wholesale electricity pricing under the Energy Security Bill, shielding households from gas price spikes, supporting renewables, and easing the cost-of-living crisis through market redesign and transparent tariffs.
The Situation Explained
Policy to decouple power prices from gas via the Energy Security Bill, stabilizing bills and reflecting renewables
Decouples power prices from gas to reduce exposure to global shocks
Implemented via the forthcoming Energy Security Bill
Aims to move beyond marginal pricing that pegs all power to gas
Expected impact on bills from April; limited relief before winter
Britons could be handed relief on rocketing household bills under Government plans to sever the link between the prices of gas and electricity, including proposals to restrict energy prices in the market, it has emerged.
Ministers are set to bring forward new laws under the Energy Security Bill to overhaul the UK's energy market in the face of the current cost-of-living crisis.
They have promised to provide greater protection for Britons against global fluctuations in energy prices, through a price cap on bills among other measures.
The current worldwide crisis has been exacerbated by the Ukraine war, which has sent gas prices spiralling higher.
Under the current make-up of Britain's energy market, soaring natural gas prices have had a knock-on effect on electricity costs.
But it has now been reported the new legislation will seek to prevent future shocks in the global gas market having a similar impact on electricity prices.
Yet the overhaul might not come in time to ease high winter energy costs for households ahead of this winter.
According to The Times, Business Secretary Kwasi Kwarteng will outline proposals for reforms in the coming weeks.
These will then form part of the Energy Security Bill to be introduced in the autumn, with officials anticipating a decrease in energy bills by April.
The newspaper said the plans will end the current system under which the wholesale cost of gas effectively determines the price of electricity for households.
Although more than a quarter of Britain's electricity comes from renewable sources, under current market rules it is the most expensive megawatt needed to meet demand that determines the price for all electricity generation.
This means that soaring gas prices have driven up all electricity costs in recent months, even though only around 40% of UK electricity comes from gas power stations.
Energy experts have compared the current market to train passengers having to pay the peak-period price for every journey they make.
One Government source told The Times: 'In the past it didn’t really matter because the price of gas was reasonably stable.
'Now it seems completely crazy that the price of electricity is based on the price of gas when a large amount of our generation is from renewables.'
It was also claimed ministers hope the reforms will make the market more transparent and emphasise to consumers the benefits of decarbonisation, amid an ongoing industry debate over free electricity for consumers.
A Government spokesperson said: 'The high global gas prices and linked high electricity prices that we are currently facing have given added urgency to the need to consider electricity market reform.
