Investing.com — Britain’s plans to lower electricity prices by breaking their link to gas could pressure wholesale power prices and weigh on utilities with UK generation exposure.
Chancellor Rachel Reeves said she and Energy Secretary Ed Miliband are working on proposals to “delink” electricity prices from gas, with more details expected “in the next sort of few days, weeks.”
The UK power market operates on a marginal pricing system, where gas-fired plants often set the electricity price.
Analysts at Jefferies flagged potential negative implications for utilities exposed to renewable and nuclear merchant generation assets in the UK, including , , and Ørsted (CSE:ORSTED).
“We flag two potential negative developments for utilities exposed to renewable/nuclear merchant generation assets in the UK,” Jefferies said in a note, citing both the proposed pricing changes and the planned abolition of the Carbon Price Support from April 2028.
The Carbon Price Support is a tax on fossil fuels used in UK electricity generation and feeds into power prices where carbon-emitting generation, such as gas, sets the price.
Jefferies estimated that a roughly £5 per megawatt hour change in power prices would imply a 2% to 3% negative impact at net income level for UK generators, with Ørsted at around 1%.
Reeves said the government is also working on the technical details of North Sea oil and gas “tiebacks,” which use existing infrastructure to bring additional resources on stream.