UK Energy Secretary Eyes Decoupling Electricity from Gas Prices

Ed Miliband, the UK's Energy Secretary, is examining ways to separate electricity prices from volatile gas costs as the country grapples with soaring energy bills triggered by the ongoing war in Iran. The conflict, now in its fourth week, has disrupted oil and gas shipments through the Strait of Hormuz, a chokepoint for about one-fifth of global oil supplies, leading to prices exceeding $100 per barrel and prompting emergency measures including the release of strategic reserves.

Speaking at a meeting of the Parliamentary Labour Party on Monday, Miliband described the proposed reform as complicated but possible. Under the current marginal pricing system, electricity costs are determined by the most expensive source needed to meet demand, often gas, even when renewables generate the majority of power. In 2025, gas set the price 85 percent of the time, despite producing only about a quarter of electricity. This linkage has amplified the impact of the Middle East crisis, with forecasters predicting a 10 percent rise in the energy price cap by July, pushing average annual household bills to around 1,973 pounds, and potentially higher by winter.

Miliband is considering a proposal from...