The cost of energy

Status / emerging findings

• Gas remains the marginal price-setter for UK electricity 80-98% of the time despite renewables exceeding 50% of generation, making the UK more exposed to global LNG volatility than most European neighbours
• Network costs are rising significantly (from £108 to £170+ per household by 2031) and will partially offset the £150 bill reduction announced for April 2026, undermining long-term affordability gains
• Energy debt of £4.4 billion is adding approximately £150 to bills for non-indebted households; Ofgem lacks regulatory levers to address existing debt, which remains a Treasury responsibility
• Government committed £150 bill support from April 2026 and expanded Warm Home Discount to 6 million households, but declined to commit to further support after June 2026 price cap expiry citing geopolitical uncertainty
• Multiple industrial closures have already occurred; British Industrial Competitiveness Scheme (BICS) arriving in 2027 is too slow, affecting only 7,000 businesses (~3% of industrial sector) and leaving urgent 2026-27 gap unfilled

Why it matters

Energy bills are a direct determinant of whether millions of UK households can heat their homes and whether UK industry remains globally competitive; the committee is stress-testing whether government commitments to £150 bill relief and longer-term cost reduction are achievable or will be overwhelmed by structural cost increases.

Tone arc

Inquiry opened cooperatively with expert witnesses in mid-2025 (Dec, Jan sessions) discussing technical solutions and market reform, but shifted sharply adversarial by March 2026 as committee confronted Minister Michael Shanks on the realism of bill reduction commitments amid rising network costs, gas price dependency, and geopolitical risk.

Key witnesses

Michael Shanks (Minister for Energy), Jonathan Mills (Director General for Energy Markets, DESNZ), Jonathan Brearley (Chief Executive, Ofgem), Lawrence Slade (Energy Networks Association), Tom Edwards (Cornwall Insight), Professor Michael Grubb (UCL, energy markets expert), David Buttress, Chris O'Shea, Rachel Fletcher (Energy retailers: OVO, E.ON, ScottishPower), Verity Davidge (Energy Intensive Users Group)