Next Prime Minister must tackle Britain’s broken energy system, urges Good Energy Report
Household energy bills could be cut by over £270 a year under a new set of practical reforms outlined in a major report published today by Good Energy.
The report comes ahead of another increase in the energy price cap, with the typical annual bill expected to reach £1,663 from 1 July — 46% higher than in 2019. This comes as a record 2.36 million people live in fuel poverty.
The report, entitled ‘Rewiring the Market: How to Tackle the Hidden Causes of High Energy Bills’, proposes a new package of measures that could reduce typical household bills by an additional £158 a year. The proposals follow on from the changes made by the Government at the last Budget and, combined, would reduce the annual bill for an average UK household by £272 a year, bringing the Government within much closer reach of its Manifesto pledge to reduce household bills by £300 by 2030.
Nigel Pocklington, Chief Executive of Good Energy Group, said: “Rising energy bills are becoming a financial nightmare for millions of households across the UK, and a major brake on our prospects of growing our economy. Over the past five years, we have witnessed a series of energy shocks due to conflict abroad, proving that our current system is neither fit for purpose nor structured in a fair way for households to pay for their energy.
“We need to urgently reform the way the market operates to deliver and incentivise a cleaner, more affordable energy system. The priority now should be turning that into action. The next Prime Minister must set out a clear plan for how Britain will move away from high gas prices and bring bills down for good. The Labour Government still has time to deliver on its ambition to cut household bills, but doing so requires urgent action to decouple electricity prices from gas, so consumers can fully benefit from lower-cost, homegrown clean energy. Our proposal sets out a practical package to achieve this. The report demonstrates that credible steps can be taken now to break the link with gas and reduce bills, while keeping the need for longer-term reform firmly on the political agenda.”
Good Energy says there are three practical steps ministers could take before this winter to make bills cheaper:
• Move policy costs off energy bills and into general taxation
• Break the link between gas and electricity prices
• Incentivise clean energy investment
What the plan would do – three key steps
Good Energy’s report has three key stages, made up of short-term changes that could ease pressure on bills quickly, and longer-term reforms designed to fix the overall energy system to safeguard it from future price shocks driven by instability abroad.
1. Move policy costs off energy bills and into general taxation.
In the short term, Good Energy proposes that the remaining energy levies should be removed from domestic bills and into general taxation, so they are paid for more fairly. Currently, these costs are a hidden tax and are added to bills in a way that hits lower-income households hardest. Good Energy argues that shifting them into taxation would mean bills are based more on ability to pay, rather than loading costs onto everyone’s energy use in the same way.
As part of this, the targeted Warm Home Discount (WHD) – available to six million households that require vulnerable support – should be increased by £300 to £450.
2. Breaking Britain’s reliance on gas pricing
Good Energy says the core issue is that gas still drives the price of electricity in Britain, even when much of that electricity is being generated by cheaper renewable power. In 2024, around 90% of energy production was linked to gas prices, leaving households exposed to volatile international markets even when lower-cost clean electricity is being produced in the UK.
This effectively makes the UK a ‘price taker’ with gas price rises driving about two-thirds of the increase in bills since 2021.
Current Government plans to break the link between gas and electricity prices do not go nearly far enough. Moving some older renewable energy producers onto fixed-price contracts will not stop gas from setting the overall price of electricity, so bill reductions would be small, with savings of about £3.50 per household when prices are high, less than £1 in typical cases, and possible bill increases if wholesale prices fall.
Over the longer term, Good Energy calls for Britain to break the gas–electricity link entirely. The report proposes creating a ‘strategic reserve’ for gas power stations, meaning they would only operate when needed – such as in peak demand – rather than setting daily prices. In return, gas providers receive a stable, regulated return, allowing power prices to better reflect the lower cost of renewables. Good Energy believes this plan could be implemented within two years.
3. Incentivise clean energy investment
Good Energy is also backing a proposal from the New Economics Foundation to make it cheaper to invest in clean energy. The idea is for the Bank of England to offer long-term, low interest loans to invest in renewable energy projects and building retrofits. Because these projects would cost less to build, they would cost less to run, bringing down the overall cost of producing electricity. Over time, those lower costs feed through into people’s energy bills, as suppliers can buy and sell power more cheaply.
The impact – bill cuts that strengthen household and public finances
For a typical two-bed semi-detached family home, the proposed measures would reduce bills by £158. Combined with steps already taken by the Government, the total saving would rise to £272.
Good Energy also says the package would not just help households. The report states that the proposed measures could reduce business electricity costs by 31%, helping schools, hospitals, pubs and other businesses, while also supporting investment in sectors the Government wants to grow, including AI and data centres.
Good Energy analysis shows the reforms represent an annual cost of £11.83bn but deliver £17.53bn in annual savings to billpayers. The report also says it could help ease inflation by around 0.65 percentage points, reducing the cost of producing goods, running businesses and delivering public services. This would help reduce wider economic uncertainty, including lower interest rates and borrowing costs. In effect, lowering energy costs can help ease cost-of-living pressures.
Good Energy says the report is designed to start a more open and urgent debate about the future of the UK’s energy system. Unless the link between gas and electricity prices is broken, households will continue to face high and volatile bills. This plan focuses on the practical steps that could help protect households ahead of this winter while also fixing the underlying issues that keep energy bills artificially high.
Good Energy has written to the Rt Hon Rachel Reeves MP, Chancellor of the Exchequer, and the Rt Hon Ed Miliband MP, Secretary of State for Energy Security and Net Zero, urging the Government to accelerate reform of the electricity market and address the continued link between gas and power prices.
Chris Galpin, Senior Advisor at E3G comments: “If government is serious about tackling the cost-of-living crisis, removing levies from electricity bills needs to be the first step. It’s absurd that the UK still taxes homegrown renewable electricity more than imported fossil fuels. Removing levies from electricity bills would enable the government’s Clean Power mission to achieve real energy bill reductions”
Adam Bell, Partner, Stonehaven comments: “A second gas price crisis within five years shows that we cannot and must not tolerate its role in setting the price of electricity any longer than necessary. This report shows that the Government’s first stab at this reform is inadequate and outlines the need to take gas out of the market entirely.”
Theo Harris, Economist, New Economics Foundation: “Bringing electricity bills down is crucial for easing the cost of living, for boosting industrial competitiveness, and enabling Britain to get off the fossil fuel roller-coaster. It’s great to see a paper bringing together immediate and long-term proposals to solve this problem: Lowering bills now with targeted support and removing regressive legacy costs, fully breaking the link between gas and electricity prices, and bringing down the upstream financing costs of a clean grid. Tackling these three issues wouldn’t only bring down bills and put more money in people’s pockets, but it would bring down inflation at the national level, allowing for lower interest rates and a more stable economy.”
Detailed breakdown: The Good Energy report combines several short-term policy changes and long-term market reform recommendations. These are detailed and costed in the table below. A more complete analysis is provided in the supporting policy attachment.
Immediate short-term policy changes
| Recommendation | Financial Benefit |
| Move the remaining major levies off bills | |
| The Government has already reduced household bills by removing 75% of the Renewable Obligation from domestic electricity costs. The next step is to complete this process and extend it to the remaining major schemes, which together account for the remaining 80% of the remaining levy costs paid by UK households. 1) Moving the remaining domestic Renewables Obligation into general taxation and removing business obligation costs from electricity prices, while removing 2) Moving Warm Home Discount costs into general government spending; 3) Removing the Feed-in-Tariff from both households and business bills | Taken together, these measures would reduce a typical dual fuel bill by £76 a year (£56 from electricity and £20 from gas). Electricity costs would fall by around £40/MWH, equivalent to a 17% reduction in business prices. Savings Breakdown: • Renewables Obligation – £20 per household and £33/MWh for businesses. • Warm Home Discount – £36 per household spread across electricity and gas. • Feed-in Tariff (FiT): £19 per household and £7.7/MWh for businesses. The total cost to the Treasury would be £10.1 billion. However, these costs already exist – they would be recovered through taxation instead of bills and rebalanced where the costs sit. |
| Strengthen targeted support | |
| Increase the targeted Warm Home Discount (WHD) to six million households by £300 to £450. | At a cost of £1.8bn, this approach is much more targeted than the previous Energy Bill Support scheme, which provided £400 to all households at a cost of £12billion. |
| Total Savings • Standard household – £76. • Targeted households – £376. |
Long-term market reform
| Recommendation | Financial Benefit |
| Break the link between gas and electricity: Move gas-fired power stations out of the wholesale market and into a regulated strategic reserve, so they no longer set the marginal price of electricity. Gas would instead act as a backup supply, with providers receiving a stable, regulated return, allowing power prices to better reflect the lower cost of renewables. | Analysis from Greenpeace and Stonehaven suggests a gas strategic reserve could be implemented within two years. It would deliver savings of up to £60 a year for households and £24/MWh for businesses. |
| Lower the cost of financing clean power: Reduce the up-front capital cost for renewable energy by introducing targeted low-cost financing, such as a Bank of England scheme, which would provide low-cost finance for clean energy investment. | According to the New Economics Foundation, a 2.5 percentage point reduction in borrowing costs for renewables and grid infrastructure could reduce electricity costs by £22 per household from 2030 |
| Total Savings Strategic gas reserve delivers up to £60 per household and £24/MWh non-domestic saving. Bank of England financing scheme delivers up to £22 per household and £9/MWh non-domestic saving, by lowering the financing cost of clean electricity generation. |
Media contacts
Press@goodenergy.co.uk
Sophie Shorthose
goodenergy@secnewgate.co.uk
07804603951