A new Common Wealth report says households in England, Scotland and Wales could save nearly £200 a year if the government became the sole buyer of electricity before reselling it to consumers. The thinktank says the change would help break the link that lets gas prices set power costs most of the time.
The timing is stark. Average energy bills are due to rise by more than £200 in July because of the impacts of the Iran war, keeping pressure on ministers to show they can do more than offer short-term relief. Donal Brown, speaking for the research, said Britain’s electricity market was built for a fossil fuel age and now acts as a barrier to a lower-cost, low-carbon system.
Common Wealth says the current market structure is allowing gas to determine electricity prices 80% to 90% of the time even though gas generates only a quarter of the UK’s power. In Brown’s words, that funnels billions in windfall profits to private generators while homes and businesses pay some of the highest bills in the world. The report argues that a public buying model could shave billions of pounds from electricity prices and, over five years, deliver savings of up to £74bn if gas prices stay high and electricity remains at £100 a megawatt-hour.
Under the proposal, gas-fired generators would still have a role, but as part of a strategic gas reserve paid to step in when renewables produce less or nuclear reactors are offline. Legacy nuclear plants, older windfarms that once received subsidies and existing hydroelectric stations would be covered through public power purchase agreements, with contract prices based on the average generation mix rather than the gas price. The model is closer to the nationalised power market that existed before privatisation in the 1980s than to the one Britain uses now.
That is where the argument gets harder. Earlier this year, proposals to de-link gas and electricity prices were already being discussed, but experts warned they would produce only modest savings unless ministers went further and rewrote the market itself. Brown says the alternative is plain: contract directly with generators at cost-effective prices and stop paying twice when the grid is constrained. Whether the government takes up the single-buyer idea, and how quickly it would move, is now the question hanging over the report.
