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Select committee: Energy Security and Net Zero Committee

3rd Report - The cost of energy

HC 416 Published 21 October 2026

Energy Security and Net Zero Committee The cost of energy Report on parliament.uk ↗

At a glance9 recommendations and 11 conclusions · Government response awaited: deadline 21 December 2026

The government's response

Government response awaited: deadline 21 December 2026.

Sources

Recommendations and conclusions 20

  1. 1
    The wholesale price of electricity is set most of the time by the price of... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    The wholesale price of electricity is set most of the time by the price of gas generation and it is clear we will still need gas for some time to generate some of our electricity. Yet, as a net importer of gas, the UK is vulnerable to changes in international prices of gas, which is used for electricity as well as heating and other applications. (Conclusion, Paragraph 30)
  2. 2
    The Government estimates gas will still set the price half the time in 2030, but... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    The Government estimates gas will still set the price half the time in 2030, but its current reforms and voluntary offers will be insufficient to break the link between wholesale gas and electricity prices. (Conclusion, Paragraph 31)
  3. 3
    The Government must speed up its work on re-examining options to address the role of... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    The Government must speed up its work on re-examining options to address the role of gas setting the price out of proportion to its share of electricity generation, such as switching from pay-as-clear to pay-as-bid on marginal pricing, or placing gas generating assets under a Regulated Asset Base or strategic reserve. It should publish the outcome of this work before end of
  4. 4
    We consider there was a missed opportunity in Contracts for Difference (CfDs) not covering the... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    We consider there was a missed opportunity in Contracts for Difference (CfDs) not covering the refurbishing of existing renewable assets and that greater facilitation of Power Purchase Agreements, including through government underwriting would help many business users of electricity. (Conclusion, Paragraph 33)
  5. 5
    The Government must bring about repowering reform to encourage the refurbishment of existing renewable assets... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    The Government must bring about repowering reform to encourage the refurbishment of existing renewable assets at the next CfD Allocation Round. (Recommendation, Paragraph 34)
  6. 6
    As a matter of priority, the Government should identify which heavy public sector users may... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    As a matter of priority, the Government should identify which heavy public sector users may benefit from PPAs and accelerate work on improving the market for Corporate PPAs, including addressing credit risks for business users and providing government underwriting. (Recommendation, Paragraph 35) 47
  7. 7
    Furthermore, there is an immediate need to improve the capacity of interconnectors and we recommend... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    Furthermore, there is an immediate need to improve the capacity of interconnectors and we recommend that the Government should secure the removal of barriers to efficient cross-border trading by Winter 2026. (Recommendation, Paragraph 36) Network costs
  8. 8
    With electricity demand rising after years of decline and much existing infrastructure ageing, new infrastructure... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    With electricity demand rising after years of decline and much existing infrastructure ageing, new infrastructure will be needed with concomitant costs. The energy transition needs a grid that can accommodate more distributed generation but, which by design, will experience higher constraints. The pace of connections reform is crucial if billpayers are to see the benefits of the Clean Power Mission by 2030 to offset these costs. (Conclusion, Paragraph 58)
  9. 9
    The Government should publish a policy statement by the end of 2026 on how it... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    The Government should publish a policy statement by the end of 2026 on how it intends to meet the energy demands of existing and planned data centres, stating how this will impact its energy transition plans. (Recommendation, Paragraph 59)
  10. 10
    Demand-side, or consumer-led, flexibility is key to keeping the expected rise in investment in the... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    Demand-side, or consumer-led, flexibility is key to keeping the expected rise in investment in the distribution network reasonable. However, the regulatory frameworks and systems needed to facilitate that are not yet in place, nor is the necessary deployment of automation, interoperability and smart meters. We are concerned that relying on voluntary participation will not deliver the necessary change and that the Government is not focussing on the heaviest users who could make the biggest difference. (Conclusion, Paragraph 60)
  11. 11
    We recognise that work is currently being undertaken by Ofgem but it is clear that... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    We recognise that work is currently being undertaken by Ofgem but it is clear that the transition will only happen at the necessary pace if the price of electricity is significantly decreased. The costs of network improvement are passed through to consumers, households as well as businesses, rather than being borne by generators and networks, although requiring generators and networks to bear additional costs risks the costs still being passed on to the consumer. (Conclusion, Paragraph 61)
  12. 12
    Relying on consumers to bear all of the costs of the energy transition is potentially... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    Relying on consumers to bear all of the costs of the energy transition is potentially the biggest barrier to achieving the Clean Power 2030 target and the broader benefits of moving away from fossil fuels. We recommend that the Government urgently considers how the system might be adapted to ensure the whole of the sector contributes to the cost of expanding and improving necessary electricity infrastructure. (Recommendation, Paragraph 62) 48 Policy costs
  13. 13
    The Minister told us that “a pound here and a pound there” add up to... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    The Minister told us that “a pound here and a pound there” add up to “a significant amount”. We agree. Policy costs are within the Government’s direct control and significant action has already been taken to reduce them. With wholesale costs particularly volatile following events in the Persian Gulf and with network costs rising, the reduction of policy costs remains a critical means for substantially bringing down bills. Paying for policy costs through taxation rather than bills is also more progressive. (Conclusion, Paragraph 78)
  14. 14
    There are new potential policy costs on the horizon, which, if past practice is followed,... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    There are new potential policy costs on the horizon, which, if past practice is followed, may end up on bills. These, especially if they add to the standing charge, would exacerbate the problem of billpayers paying high costs of energy irrespective of how much energy they use. (Conclusion, Paragraph 79)
  15. 15
    The Government should move remaining policy costs from electricity to gas. Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    The Government should move remaining policy costs from electricity to gas. It should publish an assessment of the feasibility of supporting separately through general taxation those users of gas who are least able to bear the added cost resulting from any levies moving across. (Recommendation, Paragraph 80)
  16. 16
    Future policy costs must not be placed on billpayers. Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    Future policy costs must not be placed on billpayers. (Recommendation, Paragraph 81) Other costs on energy bills
  17. 17
    Allowances for consumer debt are a growing part of bills under the price cap. Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    Allowances for consumer debt are a growing part of bills under the price cap. We do not believe Ofgem’s solutions are sufficient to meet the scale of the challenge, which not only immiserates those in debt, but burdens every billpayer, including those in fuel poverty, with a higher allowance passed through on their bills. This is compounded by the fact of billpayers not being given the information to know exactly what they are paying for. (Conclusion, Paragraph 87)
  18. 18
    Ofgem should consider encouraging the trial of flexible payment systems to prevent consumers getting in... Conclusion · addressed to Department for Energy Security and Net Zero Conclusion (the committee's words)
    Ofgem should consider encouraging the trial of flexible payment systems to prevent consumers getting in to debt. (Recommendation, Paragraph 88)
  19. 19
    The debt burden has increased since the Committee’s last Report. Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    The debt burden has increased since the Committee’s last Report. Government and Ofgem must now match the Committee’s earlier ambition on debt relief. The networks achieved higher than expected profits in RIIO-2 and the Government should seek to secure a contribution from the networks towards reducing the consumer energy debt burden. (Recommendation, Paragraph 89) 49
  20. 20
    The Government should empower Ofgem to require operators across the energy sector to provide clarity... Recommendation · addressed to Department for Energy Security and Net Zero Recommendation (the committee's words)
    The Government should empower Ofgem to require operators across the energy sector to provide clarity to the public on the constituent parts of their energy bills. The Government should identify where windfall profits are made in the energy system and use such excess to reduce bills. (Recommendation, Paragraph 90) 50