What the government’s announcement really means for business

By-lined by Kelly Lovesy, Sales Director, DCC Energy Management Services 

The UK government has announced decisive action to break the link between gas and electricity prices.  

Currently, gas sets the price of electricity in roughly 60% of trading half-hours, meaning every spike in gas markets has a direct impact on business electricity bills. By cutting that link, costs should fall. 

The obvious question is: by how much, and when? 

The answer, for now at least, is not much, and not soon. But understanding why still matters, because the gap between the headline and the detail of what was announced is going to shape how organisations think about their energy strategy in the months ahead. 

What was actually announced? 

Energy Secretary Ed Miliband set out two main measures on 21 April 2026: 

1. The voluntary Wholesale Contract for Difference (WCfD), where existing renewable and low-carbon generators like wind, solar, and nuclear that are not already on a fixed-price contract will be invited to swap their gas-linked wholesale revenues for a long-term fixed price. Consultation opens this year, with the first allocations targeted for 2027. 

2. Supporting this is an increase to the Electricity Generator Levy (EGL), the windfall tax on low-carbon generators earning above a certain threshold. From 1 July 2026, the rate rises from 45% to 55% on revenues where wholesale prices exceed £75/MWh. A portion of the additional revenue the EGL creates will be recycled directly to limit bills for households and businesses, though the precise mechanism hasn’t yet been specified. 

What will be the short-term impact? 

The critical word in the WCfD is voluntary. Generators are likely only opt-in if the fixed price on offer is more attractive than their existing arrangement. Older wind and solar projects operating under the Renewables Obligation (RO) scheme, which together account for around 30% of UK electricity generation (source: UK government RO Indexation), currently receive both RO subsidy income and gas-linked wholesale revenues. At current prices, that combination significantly exceeds what today’s fixed-price WCfD auctions offer. A voluntary scheme that only touches the wholesale element, leaving the RO subsidy intact, unfortunately narrows the scope for bill reduction. 

Independent analysis from UKERC (the UK Energy Research Centre) suggests the reforms could deliver meaningful savings at scale, but that near-term impact “could be relatively modest”, particularly for businesses. The real value of the scheme is in insulating electricity prices against future gas price shocks, rather than reducing costs materially today. That is still an important outcome, especially with gas spot prices elevated following recent geopolitical disruption. But it’s not the same as a lower bill this quarter. 

Real market structure change, where the electricity price is increasingly set by fixed-price low-carbon generation rather than gas, in our view is realistically something we won’t see until the late-2020s. Gas is likely to remain the dominant price-setter through the remainder of 2026, at a minimum. 

What this means for businesses right now 

For organisations on flexible or variable arrangements, the case for locking in forward pricing through well-structured fixed contracts is as strong as it has been for some time. But the headline unit rate is only part of the picture. How pass-through clauses work, what volume tolerances apply, and how non-commodity charges are treated in the contract all matter as much, as non-commodity charges are rising regardless of what happens to the gas price. 

Looking ahead, the announcement strengthens the long-term case for Power Purchase Agreements. As more low-carbon capacity moves to fixed-price WCfDs, the pool of genuinely gas-decoupled electricity available through corporate PPAs will start to grow. For businesses with sustainability commitments, that presents a dual argument worth building toward, that offers price stability and credible decarbonisation credentials. 

On-site generation and storage offer the same benefit behind the meter. Every unit produced on-site avoids both wholesale cost and the non-commodity charges sitting above it, and battery storage extends that control into timing, reducing peak grid draw and making better use of lower-cost periods. 

The government’s long-term vision is important too. Over time, a structurally delinking electricity market will reward organisations that have built diversified, resilient energy strategies already. 

But the greatest benefit is building your own resilience now, not waiting for delinking to do the heavy lifting.