Domestic Energy Tariff

Reading Time: 17 minutes

Executive Summary

Britain’s electricity market has become increasingly difficult for households to understand. Customers face standing charges, dozens of tariffs, regional pricing differences, time-of-use tariffs, export tariffs, fixed deals, variable deals and frequent price changes.

This policy replaces complexity with a simple national electricity tariff that rewards efficient energy use while encouraging demand to move away from periods of peak demand.

The policy has four key principles:

  • One standard domestic electricity tariff across Great Britain.
  • Low-cost overnight electricity available to every household.
  • Standing charges replaced with a transparent monthly network subscription.
  • A progressive pricing model that discourages excessive peak-time consumption rather than penalising all customers equally.

Alongside this, a national demand management scheme would allow households to receive credits for allowing approved devices such as EV chargers, heat pumps and batteries to be temporarily controlled during periods of excess renewable generation or grid stress.

The aim is to lower bills over time, simplify the market, improve energy security and reduce the need for expensive balancing costs.

The Problem

The current electricity market has developed over many years and is increasingly difficult for consumers to understand.

Today’s system suffers from several issues:

  • Standing charges continue to rise even for households that use very little electricity.
  • Suppliers offer dozens of tariffs that are difficult to compare.
  • Customers who are less engaged often pay more.
  • Regional pricing differences create perceived unfairness.
  • Peak demand requires expensive generation and balancing services.
  • Renewable electricity is sometimes curtailed while consumers continue paying high prices.
  • Negative wholesale prices can occur while retail prices remain high.
  • Consumers have little understanding of how their behaviour affects the grid.

Meanwhile Britain is rapidly electrifying transport and heating.

Millions of electric vehicles and heat pumps will significantly increase electricity demand.

Rather than continuously building generation purely to satisfy a few hours of evening demand each day, Britain should reshape when electricity is consumed.

Objectives

The policy aims to:

  • simplify domestic electricity pricing
  • reduce household electricity bills over time
  • remove confusing standing charges
  • encourage off-peak electricity consumption
  • reduce peak demand
  • improve utilisation of renewable generation
  • reduce balancing costs
  • provide stable investment signals for generators
  • improve long-term grid resilience
  • ensure vulnerable households remain protected.

Policy Details

A Single National Domestic Tariff

Every domestic electricity supplier would offer the same default tariff structure.

Competition between suppliers would focus on customer service, innovation and efficiency rather than creating increasingly complex pricing structures.

Two Electricity Prices

Every household would receive:

Peak Rate

Applies between: 05:30 – 23:30

Target price: 15p per kWh

Off-Peak Rate

Applies between: 23:30 – 05:30

Target price: 7.5p per kWh (50% of peak)

This automatically rewards households that:

  • charge electric vehicles overnight
  • heat thermal storage
  • run washing machines overnight
  • use Economy 7 heating
  • operate heat pumps more efficiently.

Unlike today’s specialist tariffs, every household would benefit.

Replace Standing Charges

Standing charges would be removed.

Instead households would pay a simple monthly network subscription.

Example:

A standard domestic single phase supply would have a monthly subscription of £25. A domestic three-phase supply could have a slightly higher rate as this is generally for larger properties that have higher consumption.

This subscription would fund:

  • local distribution networks
  • national transmission
  • meter infrastructure
  • system operation
  • resilience investment.

This is significantly easier for customers to understand than paying a daily charge regardless of electricity use.

Progressive Peak Allowance

Progressive Peak Allowance and Pricing Tiers

The tariff would include a monthly allowance for electricity consumed during the peak period, proposed as 05:30 to 23:30.

Electricity consumed during the overnight off-peak period would not count towards the allowance.

The system would combine two progressive charges:

  1. The unit price for peak electricity would rise from 15p to 30p and then 60p per kWh as household peak consumption increased.
  2. The monthly network subscription would rise from the standard rate to double and then quadruple the standard rate.

This means households creating substantially higher peak demand would contribute more towards the generation and network capacity needed to support that demand.

Proposed tier structure

Tier 1 – Standard use

Within the household’s standard peak allowance

Peak unit price – 15p/kWh

Monthly subscription £25

Keeps normal essential household electricity affordable.

Tier 2 – High use

Above the standard allowance but within the second threshold

30p/kWh for excess units

Monthly subscription £50

Encourages households to reduce or shift discretionary peak consumption.

Tier 3 – Very high use

Above the second threshold

60p/kWh for excess units

Monthly subscription £100

Ensures households placing unusually high demands on the system contribute more towards capacity and network costs.

The higher unit rate would apply only to electricity used within the relevant tier. It would not retrospectively increase the price of all electricity used during the month.

The subscription, however, would be determined by the highest tier reached during that billing month.

For example, a household entering Tier 2 would pay:

  • 15p/kWh for electricity within its Tier 1 allowance;
  • 30p/kWh for electricity above that allowance;
  • a £50 monthly subscription.

A household entering Tier 3 would pay:

  • 15p/kWh for electricity within its Tier 1 allowance;
  • 30p/kWh for electricity within Tier 2;
  • 60p/kWh for electricity above the Tier 2 threshold;
  • a £100 monthly subscription.

Different allowances for different heating systems

A single allowance for every property would unfairly penalise households that rely on electricity for space and water heating.

Each property’s MPAN record would therefore identify its principal heating system. This would allow different peak allowances to be applied to gas-heated and electrically heated homes.

The allowance would reflect unavoidable electricity requirements rather than household income or property value.

A gas-heated household normally uses electricity for appliances, lighting, cooking and electronics. An electrically heated household may also use electricity for a heat pump, storage heating, direct electric heating and hot water.

Electrically heated homes would therefore receive a materially higher standard allowance.

Illustrative monthly allowances

Gas-heated household

For a typical gas-heated home, an illustrative structure could be:

TierMonthly peak consumptionUnit price applied in the tierMonthly subscription
Tier 1First 250 kWh15p/kWh£25
Tier 2251–500 kWh30p/kWh£50
Tier 3Above 500 kWh60p/kWh£100

A gas-heated household generally uses electricity for lighting, cooking, refrigeration, washing, entertainment and household appliances. Because it does not use large amounts of electricity for heating, a much smaller proportion of its consumption is likely to occur during the overnight off-peak period.

Assume the household uses 350 kWh in total during the month, split as follows:

Consumption periodElectricity usedUnit priceCost
Peak: 05:30–23:30First 250 kWh15p/kWh£37.50
Peak Tier 2 consumptionRemaining 70 kWh30p/kWh£21.00
Off-peak: 23:30–05:3030 kWh7.5p/kWh£2.25
Total electricity use350 kWh
£60.75
Tier 2 monthly subscription

£50.00
Total monthly electricity charge

£110.75

The household uses 320 kWh during peak hours and only 30 kWh overnight.

Because the standard Tier 1 allowance for a gas-heated household is 250 kWh of peak consumption, the household enters Tier 2.

Its bill is therefore calculated as:

  • 250 kWh of peak electricity at 15p per kWh;
  • 70 kWh of peak electricity at 30p per kWh;
  • 30 kWh of off-peak electricity at 7.5p per kWh;
  • the Tier 2 monthly subscription of £50.

This example shows why total electricity consumption alone would not determine the household’s tier. The gas-heated household uses substantially less electricity overall than the heat-pump household, but a much larger proportion is consumed during peak hours.

Electrically heated household

For a home with a heat pump or another recognised electric heating system, an illustrative structure could be:

TierMonthly peak consumptionUnit price applied in the tierMonthly subscription
Tier 1First 600 kWh15p/kWh£25
Tier 2601–1,200 kWh30p/kWh£50
Tier 3Above 1,200 kWh60p/kWh£100

For a home with a heat pump, the monthly bill would separate electricity used during the peak period from electricity used during the overnight off-peak period.

Assume the household uses 650 kWh in total during the month, split as follows:

Consumption periodElectricity usedUnit priceCost
Peak: 05:30–23:30388 kWh15p/kWh£58.20
Off-peak: 23:30–05:30262 kWh7.5p/kWh£19.65
Total electricity use650 kWh
£77.85
Tier 1 monthly subscription

£25.00
Total monthly electricity charge

£102.85

The household’s total electricity use is 650 kWh, but only the 388 kWh used during peak hours counts towards the progressive peak allowance.

Because the heat pump household has a Tier 1 peak allowance of 600 kWh, it remains within Tier 1 and pays:

  • 15p per kWh for all 388 kWh of peak electricity;
  • 7.5p per kWh for 262 kWh of off-peak electricity;
  • the standard £25 monthly subscription.

This illustrates how an electrically heated home can use more electricity overall without automatically moving into a higher tier. The policy assesses the household according to its peak-period demand, while rewarding heating, hot water and EV charging that can be shifted overnight.

Example comparison

Household typeMonthly peak useTier reachedPeak electricity chargeSubscriptionTotal before off-peak use
Gas-heated home200 kWhTier 1£30.00£25£55.00
Gas-heated home320 kWhTier 2£58.50£50£108.50
Gas-heated home600 kWhTier 3£135.00£100£235.00
Electrically heated home500 kWhTier 1£75.00£25£100.00
Electrically heated home750 kWhTier 2£135.00£50£185.00
Electrically heated home1,400 kWhTier 3£390.00£100£490.00

For the electrically heated home using 1,400 kWh, the charge would be calculated as:

  • 600 kWh at 15p: £90;
  • 600 kWh at 30p: £180;
  • 200 kWh at 60p: £120;
  • Tier 3 subscription: £100.

Why increase both the unit rate and subscription?

The two charges address different costs.

The progressive unit rate reflects the additional cost of supplying unusually high amounts of electricity during the peak period.

The progressive subscription reflects the greater network and generation capacity that must be maintained to serve high-demand households reliably.

A household with high peak consumption creates costs even when wholesale electricity is temporarily cheap. Networks, substations, cables, transformers and reserve generation must still be capable of meeting the household’s maximum demand.

Increasing both charges therefore prevents these costs from being spread equally across low- and average-use households.

Monthly reset

The allowance and subscription tier would reset at the beginning of each billing month.

A household reaching Tier 2 or Tier 3 in one unusually cold month would not remain permanently on the higher subscription.

Bills and mobile-web account pages would include an allowance tracker showing:

  • peak electricity used;
  • peak allowance remaining;
  • current subscription tier;
  • distance from the next tier;
  • off-peak electricity used;
  • estimated month-end position.

Customers would receive warnings before moving into a higher tier so that they had an opportunity to reduce or shift consumption.

Seasonal adjustment

Electric-heating allowances may need to vary by season.

A possible approach would be to provide:

  • a higher allowance between October and March;
  • a lower allowance between April and September;
  • additional temporary protection during officially defined periods of exceptionally cold weather.

This would avoid penalising households during cold winters while retaining an incentive to improve efficiency and shift flexible demand.

Protected and exceptional consumption

Additional allowances would be available for households with unavoidable electricity requirements, including:

  • medically essential equipment;
  • recognised disabilities that materially increase electricity use;
  • larger households where evidence shows the standard allowance is inadequate;
  • properties using approved electric heating systems;
  • exceptional cold-weather requirements.

Medical and protected allowances should be applied before progressive pricing is calculated.

Anti-avoidance rules

The tariff would include controls to prevent artificial movement of household consumption between MPANs or deliberate manipulation of heating classifications.

Heating-system status would be verified using installation records, Energy Performance Certificates, smart-meter patterns or approved installer documentation.

The purpose of the tiers is not to punish normal family life. It is to distinguish between ordinary essential consumption and unusually high peak demand, while giving every household a straightforward way to reduce its bill by moving flexible electricity use overnight.

Medical Allowances

Households with medically essential equipment would receive additional peak allowances.

Examples include:

  • oxygen concentrators
  • dialysis equipment
  • medical refrigeration
  • other approved medical devices.

No household should be financially disadvantaged because of essential medical needs.

National Demand Management Scheme

A nationwide voluntary demand flexibility programme would operate through electricity suppliers.

Customers could choose to allow approved devices to be temporarily controlled.

Examples include:

  • EV charging
  • heat pumps
  • immersion heaters
  • home batteries

Instead of changing electricity prices every half hour, customers would receive reward credits.

The value of these rewards would depend on grid conditions and decided by NESO.

Examples:

  • 10% discount reward
  • 25% discount reward
  • 50% discount reward
  • 70% discount reward

This keeps pricing simple while still encouraging flexibility.

Customers would always define limits such as:

  • vehicle must reach 80% by 7am
  • house temperature may increase by up to 2°C
  • battery reserve level above 20%.

Supplier-Controlled Batteries

Small domestic batteries could also participate.

Suppliers would be able to:

  • absorb excess renewable generation
  • reduce evening peak demand
  • provide balancing services.

Predictive forecasting would determine when charging and discharging should occur.

Benefits

Simpler Bills

Households understand exactly what they are paying.

Lower Bills

Greater overnight utilisation reduces system costs.

These savings can gradually reduce electricity prices.

Better Use of Renewable Energy

More wind and solar generation is consumed instead of curtailed.

Reduced Peak Demand

Electric vehicles and heat pumps naturally shift demand overnight.

Lower Balancing Costs

Less expensive short-term generation is required.

Greater Energy Security

More predictable electricity demand allows generation assets to operate more efficiently.

Fairer Charging

Low users no longer pay disproportionately high standing charges.

Heavy peak users contribute more towards the additional costs they create.

Implementation

Phase 1

Introduce the National Domestic Electricity Tariff as the default tariff for all new customers. Existing customers remain on their current tariff until their fixed contract ends or they choose to switch.

Begin the transition without forcing customers to break existing contracts, while establishing a single national tariff structure.

Phase 2

Migrate all eligible households to the standard tariff. Customers with smart meters and half-hourly settlement automatically receive the universal off-peak rate (target 7.5p/kWh) between 23:30 and 05:30.

Give every household access to low-cost overnight electricity and encourage EV charging, heat pumps and other flexible demand to shift away from peak periods.

Phase 3

Replace daily standing charges with a fixed monthly network subscription. Suppliers update billing systems to collect the subscription instead of a daily charge.

Make network costs transparent, easier to understand and fairer, while removing one of the most unpopular aspects of electricity bills.

Phase 4

Update MPAN records to identify each property’s primary heating system (e.g. heat pump, direct electric heating, storage heating, gas, oil or LPG).

Enable accurate administration of future allowances, support schemes and energy planning without relying on customer declarations.

Phase 5a

Introduce the monthly peak electricity allowance and progressive pricing tiers. Suppliers update billing systems to calculate allowances and apply higher rates only to peak consumption above the allowance.

Encourage households to reduce unnecessary peak demand while keeping essential electricity affordable.

Phase 5b

Introduce additional peak allowances for households with approved medical equipment or other protected circumstances.

Ensure vulnerable customers are not financially disadvantaged by unavoidable electricity consumption.

Phase 6

Launch the National Demand Management Scheme. Customers can voluntarily enrol eligible devices such as EV chargers, heat pumps, hot water cylinders and home batteries.

Reward households for providing flexibility to the grid without introducing complicated dynamic electricity pricing.

Phase 7

Expand supplier-managed flexibility services, including approved domestic batteries and other smart appliances, operating within customer-defined comfort and charging limits.

Improve grid balancing, reduce renewable curtailment, lower balancing costs and increase the use of low-cost renewable electricity.

Phase 8

Review the tariff annually using evidence from NESO, Ofgem and suppliers. Adjust the subscription level, peak allowance and unit rates where necessary to reflect changes in network costs, generation mix and electricity demand.

Ensure the tariff remains fair, financially sustainable and aligned with Britain’s long-term energy strategy while providing stability for consumers and investors.

Phased price reduction

The standard peak electricity price would initially reduce more quickly, falling by approximately 2p per kWh in each of the first four quarters. This would bring the price from 28p to 20p per kWh within the first year.

Once the initial restructuring of network charges and electricity pricing had been completed, reductions would become more gradual. The price would fall by 1p per quarter for the following two quarters and then by 0.5p per quarter until reaching the long-term target of 15p per kWh at the end of the third year.

Each reduction would be subject to confirmation that the tariff remained fully funded and that security of supply, supplier stability and essential network operations were protected.

QuarterTarget peak unit rateQuarterly reductionTotal reduction from 28p
Baseline28.0p/kWh
Q126.0p/kWh2.0p2.0p
Q224.0p/kWh2.0p4.0p
Q322.0p/kWh2.0p6.0p
Q420.0p/kWh2.0p8.0p
Q519.0p/kWh1.0p9.0p
Q618.0p/kWh1.0p10.0p
Q717.5p/kWh0.5p10.5p
Q817.0p/kWh0.5p11.0p
Q916.5p/kWh0.5p11.5p
Q1016.0p/kWh0.5p12.0p
Q1115.5p/kWh0.5p12.5p
Q1215.0p/kWh0.5p13.0p

This is more politically persuasive because households would see a material reduction within the first year:

Typical monthly peak useCost at 28pCost at 20p after Year 1Monthly saving
200 kWh£56£40£16
300 kWh£84£60£24
400 kWh£112£80£32

That creates a clearer early benefit: the standard peak rate falls from 28p to 20p in the first year, then declines more gradually as market and system savings develop.

FAQ

Why not keep supplier competition?

Competition should focus on service quality and innovation rather than confusing pricing.

Why keep an overnight tariff?

Britain still has significant overnight spare generation capacity.
Electric vehicles and heat pumps naturally align with overnight electricity use.

Will everyone need a smart meter?

Only customers receiving time-based pricing require half-hourly measurement.

What happens if I exceed my allowance?

Only electricity above the allowance is charged at the higher rate.

What about Economy 7 customers?

Most would transition naturally to the universal overnight tariff.

Why not use dynamic pricing?

Constantly changing prices are difficult for consumers to understand and encourage gaming.
Simple fixed prices combined with demand-management rewards are easier to explain and trust.

Isn’t a monthly subscription just a standing charge with a different name?

At first glance, they appear similar because both are fixed charges that help fund the electricity network regardless of how much electricity is used.

The difference is one of purpose, transparency and incentives.

Today’s standing charge is often poorly understood. Many consumers believe they are paying simply for having an electricity account, when in reality much of the charge funds the infrastructure required to connect every property to the electricity network, including local distribution networks, the national transmission system, metering, system operation and resilience.

By replacing the standing charge with a clearly identified Network Subscription, consumers can see exactly what they are contributing towards. The charge is no longer hidden within a complex tariff but presented as the cost of remaining connected to Britain’s electricity network.

Unlike today’s standing charge, the subscription is also linked to household demand.

Most households will remain on the standard subscription.

Households that create significantly higher peak demand move into higher subscription tiers, meaning they contribute more towards the additional network capacity and generation infrastructure needed to support that demand.

This creates a behavioural incentive for households to:

• reduce unnecessary electricity consumption;
• move flexible demand into the overnight off-peak period;
• improve the efficiency of their home;
• invest in technologies such as solar panels, home batteries or smart energy management where appropriate.

Doesn’t this still disadvantage low-consumption households?

Every connected property benefits from the electricity network, whether it uses 50 kWh or 500 kWh each month.

The costs of maintaining cables, substations, transformers, control systems, emergency response and system resilience exist regardless of individual consumption. Those fixed costs must be recovered from connected customers.

Under this policy, households with modest electricity use will remain on the lowest subscription tier, ensuring they pay the minimum contribution towards the shared network.

The policy also avoids creating an unintended subsidy for second homes or rarely occupied properties. Even if a property consumes very little electricity, it still requires the network to remain available 24 hours a day, 365 days a year. It is therefore reasonable that every connected property contributes towards maintaining that infrastructure.

The progressive subscription structure ensures that the largest contributors to peak demand—who place the greatest strain on the network—pay more than households with ordinary electricity needs. This is intended to create a fairer balance between recovering the fixed costs of the electricity system and encouraging more efficient use of the network.

Won’t everyone simply move their electricity use overnight and create a new peak?

This is unlikely.


Britain’s electricity demand is consistently much lower overnight than during the daytime. While the exact difference varies from day to day and season to season, overnight demand is typically around 30–35% lower because most businesses, offices, factories, schools and public buildings are closed.


The purpose of this policy is not to move all electricity consumption into the overnight period. It is to flatten the daily demand curve by shifting flexible household demand away from the busiest hours.


Today’s electricity system experiences a large rise in demand during the morning and evening as homes and businesses use electricity simultaneously. Meeting these short-lived peaks requires additional generation, network capacity and balancing services that are expensive to provide.


Increasing overnight demand makes better use of infrastructure that already exists. Generators such as nuclear power stations and many renewable assets operate more efficiently when producing a stable output rather than continually increasing and decreasing generation to follow demand.


The largest sources of flexible household electricity demand are also well suited to overnight operation, including:


charging electric vehicles;
heating hot water cylinders;
scheduling heat pump operation where appropriate;
charging home batteries.


Modern smart charging systems already stagger the charging of electric vehicles rather than starting every charger at exactly the same time. Heat pumps can also pre-heat homes or hot water within comfort limits set by the customer. These technologies naturally spread demand across the overnight window instead of creating a single spike.


As Britain’s electricity system evolves, NESO would continue to monitor demand patterns and could recommend adjustments to the off-peak window if required. The policy is therefore designed to be adaptable while maintaining its core objective: reducing expensive daytime peaks and making better use of Britain’s generation and network assets throughout the day.

Every connected property benefits from the electricity network, whether it uses 50 kWh or 500 kWh each month.

The costs of maintaining cables, substations, transformers, control systems, emergency response and system resilience exist regardless of individual consumption. Those fixed costs must be recovered from connected customers.

Under this policy, households with modest electricity use will remain on the lowest subscription tier, ensuring they pay the minimum contribution towards the shared network.

The policy also avoids creating an unintended subsidy for second homes or rarely occupied properties. Even if a property consumes very little electricity, it still requires the network to remain available 24 hours a day, 365 days a year. It is therefore reasonable that every connected property contributes towards maintaining that infrastructure.

The progressive subscription structure ensures that the largest contributors to peak demand—who place the greatest strain on the network—pay more than households with ordinary electricity needs. This is intended to create a fairer balance between recovering the fixed costs of the electricity system and encouraging more efficient use of the network.

If network costs are removed from the unit price, won’t there be a funding shortfall?

No.

The purpose of this policy is not to reduce the amount of money invested in Britain’s electricity networks. It is to make the way those costs are recovered simpler, fairer and more transparent.

Today, network costs are spread across standing charges, unit rates and a range of complex industry charges that are largely invisible to consumers. As a result, few people understand what they are actually paying for.

Under this policy, the Network Subscription would be designed to recover the genuine day-to-day cost of operating and maintaining the electricity distribution network. This includes activities such as maintaining local cables, substations, transformers, metering infrastructure, fault response and routine asset replacement.

The subscription would be reviewed periodically by the regulator to ensure it accurately reflects the efficient cost of running the network.

However, this policy also recognises that not all electricity infrastructure serves the same purpose.

Major strategic projects—such as new high-voltage transmission lines, interconnectors, offshore transmission networks and other nationally significant infrastructure—are investments that benefit the country as a whole. These projects support national energy security, economic growth and the transition to low-carbon electricity over many decades.

For that reason, they should increasingly be treated as national infrastructure, in much the same way as motorways, railways or flood defences. Funding these projects through central government spreads the cost across society and across future generations that will benefit from the investment, rather than placing the burden solely on today’s electricity consumers.


Separating local operating costs from national strategic investment also provides much greater transparency. Consumers can clearly see what they are paying to remain connected to the local network, while Parliament retains oversight of major national infrastructure programmes through the normal public spending process.


This approach creates a clearer distinction between the cost of running the electricity system and the cost of building Britain’s future energy infrastructure, allowing each to be funded in the most appropriate way.

Why is the long-term target a peak electricity price of 15p per kWh?

The 15p per kWh target has been chosen because it makes one of the Government’s key decarbonisation technologies—the heat pump—economically competitive with gas heating.

A modern air source heat pump typically has a Seasonal Performance Factor (SPF) of around 3. This means that, over the course of a year, it produces approximately 3 units of heat for every 1 unit of electricity consumed.

At a peak electricity price of 15p per kWh, the effective cost of heat is approximately:

15p ÷ 3 = 5p per kWh of heat

This is broadly comparable with the cost of producing heat from a modern gas boiler using today’s typical domestic gas prices.

If electricity prices remain significantly above this level, households may find that running a heat pump costs more than heating with gas. That weakens the financial case for switching away from fossil fuels and slows progress towards decarbonising home heating.

Setting a long-term target of 15p per kWh therefore aligns consumer incentives with national energy policy. It allows households to adopt heat pumps without facing higher heating costs while encouraging greater electrification of transport and heating.

The target is also achievable because Britain is increasing its supply of low-cost renewable electricity, expanding nuclear generation, improving demand flexibility and making better use of existing generation assets. As the electricity system becomes more efficient and balancing costs fall, those savings should increasingly be passed on to consumers.

The objective is simple:

  • Heating a home with a heat pump should cost no more than heating it with gas.

When consumers can choose low-carbon technology without paying a financial penalty, adoption is likely to increase naturally without relying solely on grants or regulation.

Will the 15p electricity price increase over time?

No price can remain fixed forever. Like any other part of the economy, electricity generation costs will be affected by inflation, changes in technology, and wider economic conditions. However, under this policy, any future increases should broadly track inflation rather than the large price shocks households have experienced in recent years.

For example, if inflation averaged 2% per year, a 15p per kWh unit rate would increase by just 0.3p per kWh after one year. Even after several years, the increase would remain gradual and predictable, allowing households to plan with confidence.

The long-term direction of travel should also be towards lower electricity costs, not higher ones. Renewable generation has very low operating costs because wind and sunshine are free. As more renewable generation, battery storage and a smarter electricity grid are built, the cost of producing electricity should continue to fall over time.

The purpose of this policy is to ensure those savings are passed on to consumers instead of being hidden within a complicated system of standing charges, network charges and policy levies.

Criticisms

“This removes consumer choice.”

The policy simplifies pricing while maintaining competition on customer service, innovation and support.

“Large families will pay more.”

Peak allowances can be adjusted based on household composition and medical requirements if evidence shows this is necessary.

“Standing charges are unavoidable.”

Network infrastructure still requires funding.
This policy simply makes those costs more transparent through a fixed monthly subscription.

“Won’t people simply move all demand overnight?”

That is largely the objective.
Higher overnight demand improves utilisation of generation assets, particularly wind, nuclear and overnight renewable production, reducing overall system costs.

“Will suppliers lose flexibility?”

No.
Suppliers retain flexibility through the national demand management programme and supplier-controlled batteries rather than through increasingly complex retail tariffs.

Supporting documents

References

Primary Evidence

  • National Energy System Operator (NESO) – Future Energy Scenarios (FES)
  • National Energy System Operator (NESO) – Winter Outlook
  • National Energy System Operator (NESO) – Summer Outlook
  • National Energy System Operator (NESO) – Electricity Ten Year Statement (ETYS)
  • National Energy System Operator (NESO) – Demand Flexibility Service reports
  • National Energy System Operator (NESO) – System Operability Framework

Government & Regulators

  • Department for Energy Security and Net Zero (DESNZ)
  • Ofgem
  • UK Government – Clean Power 2030 Action Plan
  • UK Government – British Energy Security Strategy
  • UK Government – Net Zero Strategy
  • UK Government – Smart Systems and Flexibility Plan
  • Climate Change Committee (CCC)
  • National Infrastructure Commission (NIC)

Network Operators

  • Energy Networks Association (ENA)
  • National Grid Electricity Transmission
  • National Grid Electricity Distribution
  • Scottish Power Energy Networks
  • Northern Powergrid
  • UK Power Networks
  • SP Energy Networks
  • Electricity North West
  • SSEN Distribution

Electricity Market

  • Elexon (Balancing & Settlement Code)
  • Low Carbon Contracts Company (Contracts for Difference)
  • EMR Delivery Body
  • Balancing Mechanism reporting data
  • EPEX Spot electricity market data

Renewable Energy & Generation

  • RenewableUK
  • Solar Energy UK
  • Energy UK
  • Nuclear Industry Association
  • National Nuclear Laboratory

Electric Vehicles & Smart Charging

  • Zapmap EV Charging Survey
  • Department for Transport EV statistics
  • Office for Zero Emission Vehicles (OZEV)
  • Octopus Energy Smart Charging reports
  • OVO Energy Flexibility reports

Heat Pumps

  • Heat Pump Association
  • MCS (Microgeneration Certification Scheme)
  • Energy Saving Trust

Consumer Data

  • Office for National Statistics (ONS)
  • Ofgem Consumer Confidence Surveys
  • Citizens Advice Energy Reports
  • National Audit Office reports on energy

Industry & Academic Research

  • Imperial College London – Energy Futures Lab
  • University of Strathclyde – Power Networks Demonstration Centre
  • Energy Systems Catapult
  • International Energy Agency (IEA)
  • International Renewable Energy Agency (IRENA)

Legislation

  • Electricity Act 1989
  • Energy Act 2023
  • Utilities Act 2000
  • Climate Change Act 2008
  • Energy Security Act (where applicable)

Data Used in Developing This Policy

  • Analysis of UK domestic electricity consumption profiles.
  • Analysis of smart meter half-hourly consumption data.
  • Analysis of domestic heat pump electricity demand.
  • Analysis of EV charging behaviour.
  • National electricity demand curves.
  • Renewable generation and curtailment data.
  • UK electricity network charging arrangements.
  • UK household electricity consumption statistics.
  • UK household travel statistics.
  • Retail tariff structures offered by UK electricity suppliers.

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