If you are here because of the practical cost question, use our cost of electricity in UK guide alongside this page. If you are here because the same announcement also lifted support for off-grid heat pump installs, use the BUS £9,000 oil and LPG update.
The government has announced a new attempt to reduce the influence of international gas prices on electricity prices in Great Britain. The core logic is straightforward: even though a large share of British electricity already comes from lower-cost renewables and nuclear, too much generation is still exposed to gas-linked wholesale pricing. When gas prices spike, electricity prices can still rise with them.
What was announced on 21 April 2026
| Measure | What the official announcement says | Timing |
|---|---|---|
| Voluntary fixed-price contracts | Existing eligible low-carbon generators not already on fixed-price contracts will be offered a voluntary route onto long-term fixed contracts. | Government says this will be introduced later in 2026, with an intention to run an allocation process in 2027. |
| Electricity Generator Levy update | The levy rate is being raised from 45% to 55% so a larger share of exceptional revenues linked to gas price spikes is available to government support. | Presented as immediate action in the announcement. |
| Wider electrification measures | The same package also references easier installation routes for EV charging, solar panels and heat pumps, plus more backing for clean power delivery. | Some elements are framed as summer consultations or later delivery steps. |
Why UK electricity prices still follow gas
The official announcement says about 30% of Britain's power supply is still exposed to wholesale prices set by gas. It also says Britain has moved from gas setting the electricity price around 90% of the time in the early 2020s to around 60% today.
Inference from the official sources: that means the country has already reduced the problem, but not enough to stop gas shocks spilling through into electricity prices. Cheaper renewables help, but they do not fully insulate households if a large enough share of the system still clears at gas-linked prices.
That is why people searching terms like why does electricity follow gas prices in the UK or why is electricity so expensive when renewables are cheaper are really asking two different questions at once:
- why the current market still lets gas move the benchmark price, and
- whether government can create a bigger pool of power priced outside that gas volatility.
What the government is changing
The headline change is not a single switch that instantly severs gas from electricity prices. It is a package intended to reduce the share of generation still exposed to gas-linked volatility.
- The government says the new voluntary contracts would cover generators that are not already on fixed-price contracts.
- Those contracts are aimed at around a third of Britain's power supply.
- The government says the contracts will only be offered where they deliver value for money for consumers.
- Alongside that, the levy change is meant to capture more of the exceptional upside that appears when gas shocks lift wholesale power prices.
That combination matters. One side is about structurally moving more generation onto steadier pricing. The other side is about what government does while gas-linked spikes are still happening.
When the fixed-price contract change happens
The official notes say these new fixed contracts, described as Wholesale Contracts for Difference, will be introduced later this year, with an intention to run an allocation process in 2027.
That matters for accuracy. The 21 April 2026 announcement is important, but it is not the same thing as saying the market has already been rewired. The policy direction is live now; the contract route itself still has consultation and delivery steps ahead of it.
The GOV.UK Contracts for Difference collection explains the underlying logic: CfDs give low-carbon generators a more stable price route and are designed to protect consumers from high wholesale-price periods. The new announcement extends that logic toward existing eligible generators that are not already on such contracts.
What the tax change means
The Electricity Generator Levy was already a tax on exceptional electricity-generation receipts. The HMRC policy paper explains that the levy was introduced because some low-carbon generators could receive unusually high revenues when electricity prices rose with gas prices, even if those generators were not facing the same gas input costs.
The 21 April 2026 announcement says the rate will rise from 45% to 55%.
Inference from the official sources: this is not the main structural fix for electricity pricing. It is more of a buffer measure while the gas-linked pricing problem still exists. The government is effectively saying that if gas shocks keep lifting electricity revenues in parts of the market, it wants a larger share of that upside available for public support.
What it could mean for bills, heat pumps and solar
For households, the most important message is that the government is trying to make electricity prices less hostage to fossil-fuel shocks over time. That matters because electrification decisions only get easier when electricity becomes more predictable as well as cleaner.
Inference: if more electricity output sits on fixed-price arrangements, bill volatility should be lower than it would be in a heavily gas-linked market.
Steadier electricity economics improve the long-term case for heat pumps, especially when paired with cleaner survey evidence, better design assumptions and updated grant support.
The same announcement links electricity-price reform to broader clean-power and rooftop solar delivery, which keeps solar relevant both as generation and as a hedge against imported fossil volatility.
This page should also be read with the wider retrofit pages on the site, because the pricing story is now more connected than it was a year ago:
- BUS £9,000 oil and LPG update for the same-day off-grid grant move
- Cost of electricity in UK for the current benchmark people still use in quotes and comparisons
- Heat Pump Survey for the service route behind the technical pack
- Solar PV survey if the next decision is site viability rather than policy interpretation
What is not changing overnight
This announcement does not mean electricity prices suddenly stop reacting to gas in April 2026. It also does not mean every consumer bill instantly falls the moment the story is published.
- The government says gas still sets the wholesale price around 60% of the time today.
- The new voluntary contract route still needs later-2026 delivery work and a planned 2027 allocation process.
- Some other parts of the package are summer consultations rather than live rule changes today.
The honest read is that this is a meaningful policy move, not an overnight market reset. It improves the direction of travel and creates a stronger case for electrification, but the operational change arrives in stages.
If you are using this page for commercial conversations, pair it with the current electricity-cost benchmark page and the BUS off-grid grant update. If you need the survey and pack route behind those decisions, use the Heat Pump Survey page.
Questions people are asking right now
Why do UK electricity prices still follow gas?
Because the government says a significant share of Britain's electricity output is still exposed to wholesale prices set by gas, so gas spikes can still push power prices up.
Did the government break the gas-electricity link on 21 April 2026?
No. The announcement sets out a new route and new measures, but the contract reform itself is later in 2026 with an intended 2027 allocation process.
Will this cut bills immediately?
Not automatically. The official announcement is about reducing exposure over time and improving resilience against future gas shocks, not promising an instant bill reset.
Why does this matter for heat pumps and solar?
Because the business case for electrification becomes stronger when electricity prices are cleaner and more stable, not just when grant support improves.