Octopus Energy has urged incoming prime minister Andy Burnham to overhaul Britain’s electricity market, saying the changes could cut the average household bill by up to £189 a year.
The supplier said reforming wholesale electricity pricing would save households around £114 a year, and also called for energy levies to be moved from electricity bills into general taxation, a change it said would cut a further £75 from annual bills.
The proposals come as Burnham prepares to enter Downing Street on Monday with lower energy bills at the centre of his plans to tackle the cost of living.
He is considering a range of measures, including removing VAT from energy bills, moving older renewable projects onto fixed-price contracts and introducing an “affordable energy guarantee”.
The proposal would give every household a cheaper rate for an essential amount of electricity and gas.
Industry calls for lower electricity costs
Octopus said the current electricity market forces consumers to pay gas-linked prices even when cheaper renewable electricity is available.
The supplier estimated those market rules added £1.5bn to household bills last year and warned the cost could rise to £10bn a year by 2030 without reform.
The company said wider market changes could save households and businesses billions over the coming decades, although it warned the reforms would take around two years to deliver.
The intervention adds to growing pressure from across the energy industry.
In a letter to Burnham, the Nuclear Industry Association and other trade bodies said electricity prices had become a barrier to economic growth and the transition to cleaner energy.
“The energy transition will only succeed if it is practical, fair and felt by the public as a source of better jobs, stronger communities and lower bills,” they said.
The groups urged Burnham to consider paying some energy policy costs through general taxation instead of electricity bills.
They argued the change would make electricity cheaper and encourage households to switch to technologies such as heat pumps and electric vehicles.
The call follows a report from the CBI and Energy UK, which said Britain’s industrial electricity prices are around 45 per cent higher than the G7 average.
Energy UK chief executive Dhara Vyas said: “Energy is an essential service that underpins both daily life and economic growth.”
“Yet years of making policy decisions with little regard to business energy users have left the UK with some of the highest industrial energy costs in the developed world.”
Burnham has made cutting the cost of living one of his first priorities. Alongside energy reforms, he is expected to announce lower bus fares, plans to bring water and energy companies into public ownership and the biggest council house-building programme since the post-war period.
