A proposed change to the UK's energy market could save households approximately £185 per year, according to a thinktank report. The Labour government's plan to decouple gas and electricity prices aims to reduce consumer bills following the Iran war.
Single Buyer Model
Public procurement of electricity, where the government becomes the single buyer of power before reselling it to consumers, could slash billions from electricity prices, the report found. Donal Brown, a senior researcher in energy policy at the University of Oxford, authored the report for the thinktank Common Wealth. He stated: "Britain's electricity market was designed for a fossil fuel age and it's now a key barrier to a lower cost, low-carbon future."
Breaking the Gas Link
Brown highlighted that "gas still sets the price for 80% to 90% of the time, while generating only a quarter of our power. This funnels billions in windfall profits to private generators, while UK homes and businesses pay some of the highest bills in the world." The proposed changes would "break the link between gas and electricity prices, contracting directly with generators at cost-effective prices and eliminating wasteful practices such as paying for energy twice when the grid is constrained."
Household Savings
If electricity prices fall within the thinktank's estimates, households could save around £185 annually. Prime Minister Keir Starmer previously stated: "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. Our focus is simple: easing pressure on household budgets now, while building a homegrown energy system that protects families from global instability in the years ahead."
Energy Secretary Ed Miliband added: "As we face the second fossil fuel shock in less than 5 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."
