Executive summary
The proposed national domestic electricity tariff sets a target standard rate of 15p per kilowatt-hour.
This is achievable because the policy fundamentally changes what the electricity unit price is required to pay for.
Under the current system, household unit rates include much more than the electricity generated. Consumers also pay for network infrastructure, transmission, electricity losses, balancing, supplier operating costs, policy programmes, bad debt and other industry costs through a mixture of unit rates and standing charges.
Under the proposed tariff, these costs would be separated.
The standard unit price would principally contain:
The wholesale generation cost of electricity plus a supplier margin.
The costs of operating the wider electricity system would be recovered separately through the regulated monthly Electricity Network Connection Charge. Bad debt and exceptional system risks would be supported by the Electricity Resilience Fund.
Recent market evidence shows that electricity can currently be purchased or contracted at prices substantially below 15p/kWh. Even during periods of higher wholesale prices, there remains room within a 15p retail rate for suppliers to earn a reasonable margin.
Start with the outcome the country needs
The policy begins with the outcome Britain needs:
A standard domestic electricity price of no more than 15p/kWh.
This is not an arbitrary figure.
At 15p/kWh, a heat pump operating with a seasonal performance factor of 3 produces useful heat at an effective electricity cost of approximately:
15p ÷ 3 = 5p per kWh of heat
That makes heat-pump heating competitive with gas and allows households to benefit financially from switching to cleaner electric heating.
A 15p rate would also reduce the cost of:
- household electricity;
- electric vehicles;
- heat pumps;
- electric cooking;
- home battery charging;
- domestic hot-water production.
Instead of accepting today’s complicated market structure and asking what price it produces, the policy works backwards from the price households and the wider economy need.
What the unit price would pay for
Under the reformed tariff, the standard electricity unit rate would be simplified.
Standard unit price
The standard rate would principally fund:
- the wholesale cost of generating or purchasing electricity; and
- the supplier’s commercial margin.
The principle is therefore:
Wholesale generation cost + supplier margin = retail unit price
The standard rate would not be expected to recover the full cost of operating the electricity network or wider retail system.
Electricity Network Connection Charge
The regulated monthly connection charge would instead support the fixed and shared costs of the electricity system, including:
- local distribution networks;
- national transmission infrastructure;
- electricity losses;
- system balancing;
- NESO and industry administration;
- smart meters and metering systems;
- billing and customer-service operations;
- essential supplier operating infrastructure;
- local network upgrades;
- resilience investment;
- community and substation batteries.
Policy and social-programme costs would be funded transparently through government rather than being hidden within the price of every unit of electricity.
Bad debt would be supported through the Electricity Resilience Fund instead of being added to every household’s standard unit rate.
What current wholesale prices show
Wholesale electricity is normally quoted in pounds per megawatt-hour.
The conversion is straightforward:
| Wholesale market price | Equivalent generation cost |
| £60/MWh | 6p/kWh |
| £70/MWh | 7p/kWh |
| £80/MWh | 8p/kWh |
| £90/MWh | 9p/kWh |
| £100/MWh | 10p/kWh |
| £110/MWh | 11p/kWh |
| £120/MWh | 12p/kWh |
| £150/MWh | 15p/kWh |
This means wholesale electricity must average more than £150/MWh before the generation cost itself exceeds the proposed standard retail rate.
Recent wholesale prices have generally remained below that level.
For example, Elexon reported that March 2026 forward electricity prices were approximately:
- £102.50/MWh for baseload electricity
- £102.90/MWh for peak electricity
- £102.70/MWh on average
That is equivalent to approximately 10.27p/kWh. (Elexon)
At that wholesale price, a 15p retail rate would provide approximately:
| Component | Amount |
| Wholesale electricity | 10.27p |
| Available supplier margin | 4.73p |
| Standard retail rate | 15.00p |
A margin of 4.73p on electricity costing 10.27p is substantial. It represents roughly 46% of the underlying wholesale purchase cost.
The supplier would not necessarily retain all of this as net profit. The margin would have to cover procurement decisions, commercial risk and the supplier’s regulated return. However, it demonstrates that 15p remains workable even when wholesale electricity is above 10p/kWh.
NESO’s analysis also shows that wholesale prices have fallen substantially from the exceptional levels reached during the energy crisis. Its review found that the average day-ahead price in 2024–25 was still 24% below the five-year rolling average, despite being slightly higher than the previous year. (National Energy System Operator (NESO))
Worked wholesale-price scenarios
The amount available to suppliers would vary with the cost of electricity.
| Wholesale generation cost | Supplier margin available within 15p | Margin as percentage of wholesale cost |
| 6.0p | 9.0p | 150% |
| 7.0p | 8.0p | 114% |
| 8.0p | 7.0p | 88% |
| 9.0p | 6.0p | 67% |
| 10.0p | 5.0p | 50% |
| 10.27p | 4.73p | 46% |
| 11.0p | 4.0p | 36% |
| 12.0p | 3.0p | 25% |
| 13.0p | 2.0p | 15% |
| 14.0p | 1.0p | 7% |
| 15.0p | 0p | 0% |
This shows that the 15p standard rate remains commercially viable across a broad range of normal wholesale-market conditions.
At a wholesale price of £80/MWh, equivalent to 8p/kWh, a supplier would have as much as 7p/kWh of gross margin available within the standard tariff.
At £100/MWh, equivalent to 10p/kWh, the available margin would still be 5p/kWh.
Even at £120/MWh, equivalent to 12p/kWh, there would be 3p/kWh available.
The pressure point would only emerge if wholesale prices remained close to or above £150/MWh for an extended period.
Contracts for Difference provide long-term evidence
Short-term wholesale prices fluctuate because of weather, gas prices, demand, plant outages and international events.
Contracts for Difference provide a useful indication of the longer-term generation prices at which new electricity projects are prepared to operate.
The 2026 Allocation Round 7 and Allocation Round 7a results awarded contracts at the following prices, stated in 2024 money:
| Generation technology | Strike price | Equivalent per kWh | Room beneath 15p |
| Solar photovoltaic | £65.23/MWh | 6.52p | 8.48p |
| Onshore wind | £72.24/MWh | 7.22p | 7.78p |
| Scottish offshore wind | £89.49/MWh | 8.95p | 6.05p |
| Other fixed-bottom offshore wind | £91.20/MWh | 9.12p | 5.88p |
The latest auction secured approximately 4.9GW of solar and 1.3GW of onshore wind at £65.23/MWh and £72.24/MWh respectively. (GOV.UK)
The offshore wind auction secured more than 8GW of capacity, primarily at £89.49–£91.20/MWh in 2024 prices. (GOV.UK)
These prices are all below the proposed 15p retail rate.
Example: solar
| Component | Amount |
| CfD generation price | 6.52p |
| Available supplier margin | 8.48p |
| Retail price | 15.00p |
Example: onshore wind
| Component | Amount |
| CfD generation price | 7.22p |
| Available supplier margin | 7.78p |
| Retail price | 15.00p |
Example: offshore wind
| Component | Amount |
| CfD generation price | 9.12p |
| Available supplier margin | 5.88p |
| Retail price | 15.00p |
A CfD strike price is not exactly the same as the wholesale price paid by every supplier at every moment. It is a long-term revenue guarantee for a generator and is indexed over time.
Nevertheless, the results provide strong evidence that large volumes of new British electricity generation can be delivered at generation costs materially below 15p/kWh.
Why current retail prices are still so high
The current domestic electricity unit rate is much higher than the cost of generating the electricity.
For July to September 2026, the average capped electricity unit rate is 26.11p/kWh, including VAT. (Ofgem)
The difference between a wholesale price of around 8–10p and a retail rate above 26p does not mean suppliers are simply retaining the remainder as profit.
The current unit rate is required to recover numerous additional costs, including:
- transmission and distribution costs;
- network losses;
- balancing and system costs;
- policy levies;
- supplier operating allowances;
- metering;
- customer service;
- bad debt;
- market-failure costs;
- VAT;
- regulated supplier profit.
NESO describes wholesale electricity as the largest single component of the consumer price but notes that operational costs make up the remainder. It also confirms that transmission-use charges are separate from the wholesale market itself. (National Energy System Operator (NESO))
The purpose of the proposed tariff is not to pretend that these costs disappear.
It is to stop recovering all of them through the price of every additional unit of electricity.
Supplier profit under the new tariff
Energy suppliers would continue to be private commercial organisations capable of earning profit.
Their opportunity would be clear and transparent:
Buy electricity efficiently below the regulated retail ceiling and retain an appropriate portion of the difference.
A supplier purchasing electricity at an average of 8p/kWh and selling it at 15p would have a gross spread of 7p/kWh.
A supplier purchasing at 10p would have a gross spread of 5p/kWh.
This creates a strong incentive for suppliers to:
- purchase electricity efficiently;
- secure sensible long-term contracts;
- avoid excessive exposure to short-term prices;
- invest in forecasting;
- encourage customers to shift demand;
- use storage and flexible demand;
- offer good service to retain customers.
Suppliers that manage their procurement responsibly would be profitable.
Suppliers that take excessive risks would not be rescued by households through a future levy.
Supplier failure protections would be reformed separately as part of the wider energy-market reforms. The government would protect continuity of electricity supply and customer account balances, but it would not guarantee the owners or investors of a failed supplier against commercial losses.
How the higher unit-price tiers work
The 15p rate applies to normal household consumption within the standard peak allowance.
Consumption above that allowance would be charged at higher rates.
For example:
| Consumption tier | Illustrative unit rate |
| Standard allowance | 15p |
| Higher consumption | 30p |
| Very high consumption | 60p |
The higher rates would not mean suppliers receive unlimited additional profit.
The supplier would receive:
- the wholesale generation cost;
- its normal supplier margin;
- potentially a small additional administration or risk allowance.
Most of the additional revenue above the standard rate would be allocated to the Electricity Resilience Fund.
Illustrative 30p tier
Assuming a wholesale cost of 8p:
| Allocation | Illustrative amount |
| Wholesale generation | 8p |
| Supplier margin | 5p |
| Additional supplier allowance | 1p |
| Electricity Resilience Fund | 16p |
| Higher-tier rate | 30p |
Illustrative 60p tier
| Allocation | Illustrative amount |
| Wholesale generation | 8p |
| Supplier margin | 5p |
| Additional supplier allowance | 2p |
| Electricity Resilience Fund | 45p |
| Very-high-tier rate | 60p |
The precise allocation would be regulated annually.
This ensures that higher-tier pricing discourages unnecessary peak consumption without creating excessive supplier profits.
The Electricity Resilience Fund
The resilience fund would protect customers and the electricity system rather than insulating poorly managed suppliers from failure.
It could support:
- household bad debt;
- emergency assistance for vulnerable customers;
- temporary wholesale-price shocks;
- customer-account transfers after supplier failure;
- storm and flood recovery;
- cyber-security incidents;
- strategic electricity storage;
- local substation batteries;
- urgent network repairs;
- reducing future network connection charges.
The fund would receive revenue from:
- part of the higher and very-high consumption rates;
- surplus connection-charge revenue;
- market penalties;
- other regulated energy-system income.
Bad debt would therefore be treated as a shared social and system-resilience issue rather than being quietly added to every standard unit of electricity.
What happens during an extreme wholesale-price shock?
A 15p target does not mean wholesale prices can never temporarily exceed 15p.
The exceptional market conditions following Russia’s invasion of Ukraine demonstrated that wholesale energy prices can rise sharply.
The tariff would therefore need safeguards.
These could include:
- a regulated supplier procurement reserve;
- long-term generation contracts;
- greater use of Contracts for Difference;
- strategic storage;
- domestic renewable and nuclear generation;
- interconnectors;
- demand management;
- temporary resilience-fund support;
- an exceptional-price review mechanism.
Any temporary support would be transparent and time limited.
The objective would be to avoid immediately passing every short-term market spike to households while also preventing the system from making unsustainable promises.
The 15p price should therefore be described as the standard regulated target rate under normal market conditions, supported by long-term reforms designed to make those conditions increasingly normal.
Why 15p is credible
The evidence supports four important conclusions.
Wholesale electricity frequently costs much less than 15p
Wholesale prices of £60–£100/MWh are equivalent to only 6–10p/kWh.
Recent forward prices still leave a commercial margin
A forward wholesale price of £102.70/MWh is equivalent to 10.27p/kWh, leaving 4.73p within a 15p standard rate.
New generation is being contracted below 15p
Recent CfD prices are approximately:
- 6.52p for solar;
- 7.22p for onshore wind;
- 8.95–9.12p for fixed-bottom offshore wind.
The current retail rate pays for much more than electricity
The present rate above 26p includes network, policy, operational and industry costs that would be separated from the unit price under this policy.
Conclusion
A 15p domestic electricity unit price is not based on wishful thinking.
It is based on changing what the unit price pays for.
Under the proposed system:
The unit price pays for electricity generation and a fair supplier margin.
The regulated monthly connection charge pays for operating and maintaining the wider electricity system.
The resilience fund supports bad debt, exceptional risks and long-term system resilience.
Current wholesale and contracted generation prices demonstrate that the underlying electricity can generally be secured for significantly less than 15p/kWh. At wholesale prices of 8–10p, suppliers would still have a gross margin of approximately 5–7p within the standard rate.
Recent CfD results also show that large quantities of new solar, onshore wind and offshore wind generation can be contracted at approximately 6.5–9.1p/kWh.
The principal barrier to 15p electricity is therefore not the normal cost of generating electricity.
It is the current decision to load the cost of the entire electricity system onto household standing charges and unit rates.
By separating those costs transparently, regulating the network connection charge and preserving a clear supplier margin, the proposed tariff can credibly deliver a 15p standard domestic electricity price.
References
- National Energy System Operator, How is electricity priced? (National Energy System Operator (NESO))
- National Energy System Operator, 2025 Annual Balancing Costs Report. (National Energy System Operator (NESO))
- Elexon, March 2026 forward-market price assessment. (Elexon)
- Department for Energy Security and Net Zero, Contracts for Difference Allocation Round 7 results. (GOV.UK)
- Department for Energy Security and Net Zero, Contracts for Difference Allocation Round 7a results. (GOV.UK)
- Ofgem, electricity price-cap rates for July–September 2026. (Ofgem)