UK households could be paying £300–£400 less per year for electricity, but are instead charged gas-linked prices—even when power comes from cheaper renewable sources like wind and solar. The current pricing system means consumers do not benefit from the UK’s growing supply of low-cost renewable energy, leaving millions paying more than necessary during a cost-of-living crisis.

We call on the UK Government to change the electricity pricing system so that the cost of gas no longer disproportionately sets the price of electricity for consumers.

Currently, electricity prices are often determined by the marginal cost of gas-fired generation, even when a significant proportion of electricity is generated from cheaper renewable and nuclear sources. This means consumers are effectively charged based on the most expensive electricity source in use, rather than the average cost of generation.

A fairer system would better reflect the actual mix of electricity generation. If a large proportion of electricity comes from low-cost sources such as renewables and nuclear, with only a smaller share from gas, prices should reflect this blended cost rather than being set by the highest-cost source alone.

For example:
- Households currently pay around 27–30p per kWh for electricity under the existing system, reflecting high gas prices.
- If prices better reflected the overall cost of generation, this could be closer to 12–18p per kWh.
- For a typical household, this could mean saving approximately £300–£400 per year on electricity bills.
- On windy or sunny days, when electricity is generated more cheaply, consumers still pay gas-linked rates and do not benefit from lower costs.

We believe this system is outdated and unfair. While it may help ensure supply, it no longer reflects a modern energy system with increasing renewable generation. Consumers should benefit more directly from the UK’s investment in low-cost energy.

We urge the Government to:
- Decouple electricity prices from gas where possible
- Introduce pricing changes that reflect the true cost of the energy mix
- Accelerate market changes to ensure a fairer and more transparent pricing system

This change would help reduce energy bills, improve fairness, and better reflect the UK's transition to renewable energy.