UK Government plans to break gas influence on electricity prices

Breaking the gas link

On 21 April 2026, the Department of Energy Security and Net Zero (“DESNZ”) announced proposals to introduce measures to stabilise the influence of volatile gas markets on Great British electricity prices. The proposals are driven by concerns that international fossil fuel markets expose Great Britain to volatile gas prices, increasing the wholesale energy costs for consumers across the country. Although this pressure is gradually easing thanks to the increase in clean energy generation, around 30% of Britain’s power supply is still exposed to the wholesale prices set by gas.

DESNZ has proposed two measures to de-couple the impact of gas on the electricity price:

• voluntary long-term fixed contracts; and
• updating the Electricity Generator Levy (“EGL”) rate from 45% to 55%.

Voluntary long-term fixed contracts

The proposed new Wholesale Contract for Difference (“WCfD”) regime would apply to existing eligible generators, not already contracted under a Contract for Difference. The regime would give those generators the option to accept a fixed price for their electricity generation. 

The Government intends to consult on the WCfD in due course, however has indicated its intention that an allocation process could be run as early as 2027.

Generator accredited under the Renewables Obligation (“RO”)

The proposal is that generators accredited under the RO would still receive their RO support, however they could exchange their current forward wholesale revenues for a fixed price WCfD.

Uplift to EGL

What else do I need to know about these measures?

For generators to whom the EGL applies, the increased rate will be implemented within a few months, and generators will need to make the necessary adjustments to their accounting processes to reflect the new EGL rate. The Government has also indicated that it anticipates that this new EGL rate will encourage participation at a competitive price in the WCfD.

The detail of the WCfD has not yet been published, with a consultation to be published in due course. It is likely that such consultation will cover areas such as generator eligibility for the WCfD, and the offer and acceptance process, as well as detail around the price-setting mechanism.

Although consumers across Great Britain will no doubt welcome measures that have a positive impact on energy bills, the real impact on the industry, and the gas influence on electricity pricing, remains to be seen.