Executive Summary
The Electricity Resilience Fund is a national financial reserve designed to protect households, businesses and the electricity network from unexpected cost shocks.
Instead of allowing electricity prices to rise sharply whenever global energy markets become volatile, the fund smooths temporary increases in wholesale costs while supporting exceptional infrastructure repairs. It provides stability for consumers, confidence for businesses and resilience for the electricity system.
The fund acts as an insurance policy for the UK’s electricity market.
The Problem
One of the main criticisms of fixed electricity pricing is the question:
“What happens if wholesale prices suddenly increase?”
Recent history has shown that global events such as wars, gas supply disruptions and extreme weather can cause wholesale electricity prices to rise dramatically.
Under the current market, these increases are passed directly onto consumers through higher electricity bills.
This creates several problems:
- Household bills become unpredictable.
- Businesses struggle to forecast operating costs.
- Government is often forced into emergency support schemes funded through borrowing or taxation.
- Confidence in electrification falls because consumers fear future price spikes.
Although renewable generation is reducing the UK’s dependence on imported fossil fuels, gas-fired generation still plays an important role during periods of high demand or low renewable output.
During the transition to a cleaner electricity system, a mechanism is needed to absorb these temporary shocks without passing them directly onto consumers.
Objectives
The Electricity Resilience Fund will:
- Protect consumers from sudden wholesale price increases.
- Keep the national electricity tariff stable.
- Reduce the need for emergency government interventions.
- Provide funding for exceptional electricity network costs.
- Increase confidence in electrification.
- Create a long-term financial buffer as the UK transitions to a predominantly renewable and nuclear electricity system.
Policy Details
The Electricity Resilience Fund would operate as a national reserve.
During normal market conditions, money would be paid into the fund from higher-rate electricity consumption rather than from everyday users.
The fund would be used only in exceptional circumstances, including:
- Major wholesale electricity price shocks.
- Significant global gas supply disruptions.
- Severe international energy market volatility.
- Exceptional electricity network repair costs, such as widespread storm damage.
- Other nationally significant events affecting electricity supply.
The objective is not to subsidise everyday electricity costs but to smooth temporary shocks that would otherwise lead to sharp increases in consumer bills.
As the UK’s electricity system becomes increasingly supplied by domestic renewable generation, nuclear power and large-scale battery storage, the likelihood and size of wholesale price shocks should reduce. Over time, the fund would therefore be expected to require fewer interventions while continuing to provide protection against rare events.
How the Fund is Financed
The Electricity Resilience Fund would not require additional taxation.
Instead, it would be financed through the existing tariff structure by collecting revenue from:
- Tier 2 electricity unit prices.
- Tier 3 electricity unit prices.
- Tier 2 network subscription charges.
- Tier 3 network subscription charges.
These higher pricing tiers apply only to households consuming significantly more electricity than their standard allocation.
Most consumers would therefore contribute little or nothing to the fund during normal operation, while those placing greater demand on the electricity system would make a proportionally larger contribution.
This creates a self-financing resilience mechanism without increasing the standard electricity price.
Why Not Use General Taxation?
General taxation should fund national policy decisions, such as environmental programmes or strategic infrastructure.
The Electricity Resilience Fund has a different purpose.
It exists specifically to protect the electricity market from temporary shocks and should therefore be funded by the electricity system itself.
This ensures the fund remains transparent, ring-fenced and available whenever it is needed without competing with other areas of government spending.
Benefits
The Electricity Resilience Fund would:
- Keep electricity prices more stable.
- Increase public confidence in electrification.
- Protect households from sudden bill increases.
- Give businesses greater certainty over energy costs.
- Reduce pressure for emergency taxpayer-funded support packages.
- Provide funding for exceptional network repairs following severe weather.
- Improve the resilience of the UK’s electricity market.
Frequently Asked Questions
Would this make electricity more expensive?
No.
The standard electricity tariff remains unchanged. The fund is financed through the higher consumption tiers and higher network subscription tiers rather than increasing the base unit price.
What happens if the fund is never used?
The balance remains available for future events.
This is no different from any insurance reserve—its purpose is to be available when required rather than spent every year.
Could the Government spend the money elsewhere?
No.
The fund should be established as a ring-fenced reserve dedicated solely to electricity market resilience and exceptional network costs.
Will the fund always be needed?
Probably not at its current scale.
As the UK becomes less dependent on imported gas and increases its use of domestic renewable generation, nuclear power and battery storage, wholesale price volatility should reduce significantly.
The fund can therefore reduce in importance over time while remaining available for exceptional circumstances.
Criticisms
“This is just another hidden tax.”
It is not a tax.
The fund operates as an insurance mechanism within the electricity market and is financed only through higher consumption and higher network tiers rather than through general taxation or increases to the standard unit price.
“Why not simply let prices rise?”
Large price swings damage households, businesses and the wider economy.
A stable electricity price encourages investment, electrification and long-term economic planning.
“Won’t the fund become enormous?”
The fund should have clearly defined operating rules, minimum and maximum reserve levels, and independent oversight. Once the target reserve is reached, contributions could be reduced until the fund is required again.