Government looks to cut link between electricity and gas prices

The Government has set out new measures to break the link between volatile gas prices and the cost of electricity in a bid to reduce bills for business and households.

They include the introduction of voluntary long term fixed contracts for existing low-carbon generators not on fixed price contracts which covers around a third of Britain’s power supply.  The contracts, known as ‘Wholesale Contracts for Difference’, will be introduced later this year, with an intention to run an allocation process in 2027.

The rate charged on excess profits through the Electricity  Generators Levy will also be raised from 45% to 55% in a move the Government said would ensure an increased proportion of the extra revenues generated when the gas price spikes is available to government to support businesses and households with the impacts of the conflict in the Middle East.

The Government said Britain has already moved from gas setting the price of electricity around 90% of the time in the early 2020s, to around 60% today. It estimated gas will set the wholesale price around half of the time by 2030.

Energy Secretary Ed Miliband said: “As we face the second fossil fuel shock in less than five years, the lesson for our country is clear: The era of fossil fuel security is over, and the era of clean energy security must come of age. That’s why we’re doubling down on clean power, to give our country energy security and bring down bills for good.”