𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The government should seize “excess” profits made by energy network companies and help households struggling to pay their energy bills, a leading think tank says.

The Institute for Public Policy Research said the energy giants that run the electricity network, of which National Grid is the biggest, stand to make £5bn in excess profits for the five years from 2021 to 2026.

That could be worth up to £183 in rebates on energy bills, it claims.

National Grid and the others are responsible for building and maintaining the electricity grid. But the profits they have made in recent years are “well above the returns originally judged necessary to deliver investment”, the IPRR said.

Its report is based on analysis from Citizens Advice and does not name specific companies.

The industry called the report “fundamentally misleading”.

The network costs component of household energy bills – the part that directly contributes to grid maintenance – has already risen sharply, increasing by £129 since 2022, with a further £108 rise projected between 2026 and 2032.

IPPR recommendations include:

Joshua Emden, senior research fellow at IPPR, said: “Households are already under pressure from high energy bills, which are set to rise once again, yet billions in excess profits are being retained by network companies. That cannot be right. The government has the power to step in to make sure people get a fair deal from upgrades to the network. Clawing back excess profits and returning them to households is a key step in keeping energy bills down.”

Tazu Walden, researcher at IPPR, said: “Upgrading the electricity grid is essential for a clean and secure energy system, but the way we do it matters. Right now, the system isn’t consistently delivering value for money for consumers, and cheaper ways of running the grid are being overlooked. With the right reforms, we can build the infrastructure we need while making sure households see the benefits in lower bills.”

The intervention from the think tank comes just after the government said it was looking at a shakeup in the way electricity is priced, including looking at solutions to break the direct link between electricity and gas prices.

Under the UK’s marginal cost pricing model, gas typically determines the cost of electricity. Chancellor Rachel Reeves last week said a move away from that model is “a big change” but the “right thing to do”, and hopes to have more news on the plans “within the coming days or weeks”.

The Conservatives have blamed high energy prices on government taxes and levies.

The government also announced an increase to the so-called windfall tax on some electricity generators, which it says will help it to support households with the cost of living.

Prime Minister Sir Keir Starmer has previously said the UK needs to “get off the fossil fuel roller-coaster” to make energy bills more stable and take the pressure off family budgets.

The Energy Networks Association, the industry trade body, hit back at the report from the IPPR.

Lawrence Slade, chief executive, ENA, which represents the UK’s electricity network operators, said: “The fundamentally misleading figures being suggested by IPPR do not reflect the costs associated with essential network investments. Ofgem recently reviewed funding arrangements to ensure they represented best value to energy consumers and concluded the fairest and most accurate way to determine profitability is the return network operators make on their investment, which is set at around 5 per cent.

“Network operator returns are tightly regulated helping keep one of the world’s most reliable electricity systems running for 28 million customers, supporting 36,000 jobs and 2,400 apprenticeships – at around 66p a day on the average bill. Between 2021 and 2031, operators will unlock tens of billions of pounds in private investment to deliver the biggest upgrade to Britain’s electricity network in decades. The investment is significant, but its impact is what’s important: fewer price shocks and a more secure and stable energy system that customers can rely on for decades to come.”