Green MPs have written to Ed Miliband demanding he set out plans to decouple electricity prices from gas, after Sky News revealed he was “looking into” the policy.
The letter, seen by Sky News, calls for the government to fully commit to the measure, arguing it could knock hundreds of pounds off household energy bills by ending the “rigged system”.
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The UK uses a model of marginal cost pricing, where gas almost always sets the price of electricity, even if most of it comes from cheaper renewables.
In a bid to pile further pressure on the energy secretary, the Green MPs have also tabled an Early Day Motion in parliament, and are seeking signatories of Labour MPs.
It is not clear how many could sign it – but it comes at a time of deep frustration among Labour backbenchers at the loss of votes to the Greens, and fears about a rise in the cost of living because of the ongoing Iran war.
The Greens’ letter, headed by MP Carla Denyer and signed by the four other Green MPs, says the current system puts energy bill payers across the country “at the mercy of global gas price fluctuations”.
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She says: “I am aware that you have previously said that your department is looking into taking control of electricity prices by decoupling, but I am concerned that to-date this has not amounted to any firm action, meaning the public are once again exposed.
“With prices set to soar, the public cannot wait any longer. So can you confirm that the government will move beyond ‘looking into’ and instead commit to decoupling the price of gas from the price of electricity? And when can we expect an update to parliament on these steps?”
It has long been Green Party policy to decouple electricity prices from gas, something its “eco-populist” leader Zack Polanski restated support for in a speech on the economy last week.
As Sky News reported this week, Mr Miliband told a meeting of Labour MPs on Monday that he is committed to looking at unhitching electricity prices from gas, saying it would be “complicated but possible”.
The UK uses a system of marginal cost pricing for buying electricity on the wholesale market.
Under the system, all electricity generators bid into the market, offering to supply power at a certain price.
The system will accept the cheapest first and move upwards until enough is secured. However everyone gets paid the same price, set by the last most expensive bid used to meet demand.
In the UK, this is almost always gas-fired power stations, which are typically the most expensive source needed to fill the final gap in supply.
However, this was a private meeting and it is not the government’s official position.
Asked about decoupling in the Commons on Tuesday, Rachel Reeves argued gas is setting the price of electricity “something like a third less than it was just four years ago”, due to a reduction of gas imports.
Changing the system would require a significant state intervention, something the fiscally conservative chancellor is typically wary of.
However, Mr Miliband, whose politics are more to the left than those of Ms Reeves, is under pressure as he has driven Labour’s flagship green policies.
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This includes the ambition to become a clean superpower by 2030, where 95% of electricity would come from renewables in a bid to drive down bills by around £300 a year.
The former Labour leader has stood firm on this commitment amid calls from the Tories, and some Labour MPs, to allow new licences for oil and gas drilling in the North Sea to boost energy security.
‘End rip off Britain’
However some experts, such as eco-tycoon Dale Vince, warn that even if Mr Miliband’s green dreams are realised households will not feel the economic benefit without decoupling – as gas will dictate prices even if it is a small part of the mix.
Mr Miliband is said to be looking at a report the Labour donor has released on “breaking the link”, but there are various alternative proposals.
A report by the Common Wealth think tank last week recommend passing emergency legislation to instruct the National Energy System Operator to act as a single buyer of electricity, taking renewable generators out of the wholesale market and paying them fair, fixed prices.
Ms Denyer, the Green’s energy spokesperson and a former offshore wind engineer, told Sky News that with another fossil fuel shock looming, “looking into it really isn’t going to cut it”.
She added: “We need decisive action to end rip-off Britain. The government must commit now to breaking the link between expensive gas and cheaper renewables.”
The Department for Energy Security and Net Zero has been contacted for comment.
