Gas prices and electricity bills in the UK move together, and that’s costing households money. Even though renewables now generate more than half of the country’s power, the price you pay for electricity is still mostly set by the cost of gas. With international conflict pushing wholesale gas higher, ministers are now looking at whether to decouple the two – a change that could meaningfully cut your bills.
Note for April 2026: Wholesale gas prices remain volatile due to ongoing geopolitical pressure on global supply. If you’re on a variable tariff, your bill is directly exposed to those swings.
How gas prices set UK electricity bills
Whether your tariff is set by the energy price cap or you’ve switched to a fixed rate tariff, the price you pay for electricity is determined by the wholesale cost of electricity. That wholesale cost is in turn set by the cost of generating each unit of power.
The UK energy grid uses a system called marginal pricing. Under marginal pricing, the wholesale market price of energy is based on the most expensive unit of electricity needed to meet demand at any given moment. So if most of the nation’s power is being generated by cheap renewable sources but a small shortfall is being met by gas-fired power stations, every unit of electricity sold in that period is priced as if it came from gas.
The result: 98% of the time, the wholesale market cost of electricity is determined by gas prices, even though more than half of UK electricity comes from renewables.
| Source | Share of UK generation | Sets the wholesale price? |
|---|---|---|
| Renewables (wind, solar, hydro) | More than 50% | Rarely – cheapest unit |
| Nuclear | Around 14% | No – runs as baseload |
| Gas | Around 30% | Yes – 98% of the time |
Why are UK gas prices so high right now?
Gas prices across the world jumped after Russia’s invasion of Ukraine in 2022. The majority of the UK’s gas comes from Norway, but the drop in supply from Russia meant more European countries turning to Norwegian gas for their own needs, driving wholesale prices upwards.
The UK also imports liquid natural gas (LNG) from the US and Qatar. As the US-Iran conflict threatens energy production across the world, analysts are warning that domestic energy prices could rise sharply in response. Some industry experts believe the average household will pay £2,500 a year for energy in 2026.
Because gas sets the electricity price 98% of the time, every spike in wholesale gas feeds straight through into the price cap and into household electricity bills.
Could Labour decouple gas prices from electricity bills?
Energy Secretary Ed Miliband has said he is considering options for severing the link between gas prices and electricity prices for UK customers. This is part of the government’s wider Review of Electricity Market Arrangements (REMA), which is examining how to redesign the wholesale market so that customers benefit from cheap renewable generation.
Ecotricity owner Dale Vince has proposed a bidding system that would mean wholesale electricity prices are no longer pegged to the most expensive unit of generation used. Green party leader Zack Polanski has also called for gas and electricity prices to be decoupled.
Miliband has said he is reviewing the proposals, but has not yet committed to a specific reform timetable. Any change would be one of the most significant shake-ups of the UK electricity market in decades, and would directly affect what shows up on your bill.
What decoupling could mean for your bills?
If gas prices and electricity bills in the UK are decoupled, customers should see wholesale electricity costs fall closer to the average cost of generation, not the most expensive unit. That could mean:
- Lower unit rates for electricity, particularly during periods of high renewable output
- Less exposure to international gas price shocks
- A clearer link between investment in renewables and lower household bills
The trade-off: redesigning the market is complex, and any reform needs to keep enough gas capacity online to cover demand on cold, still days. That’s why the review is taking time, and why no firm changes have been announced.
How to protect your energy bills from price hikes
If you’re worried about your energy prices rising, there are a few things you can do right now to keep your bills under control.
The first is to switch to a fixed-rate energy tariff. A fixed tariff guarantees the unit rates you pay for gas and electricity stay the same for the duration of the deal – usually at least one year. That protects you from any further price cap increases while your fix is in place.
Switch to a fixed rate energy tariff in minutes with one free call to Please Connect Me, and know your energy prices are protected.
You can also keep bills low by reducing your energy consumption. We’ve put together more than 100 energy-saving tips for you to try – why not start by getting your home ready for an energy-efficient summer?
Questions bout gas prices and electricity bills in the UK
Why do gas prices affect electricity bills in the UK?
Because the UK uses marginal pricing, the wholesale price of electricity is set by the most expensive unit of power needed to meet demand. Gas-fired plants are usually the most expensive unit, so gas sets the electricity price around 98% of the time – even when most power on the grid is coming from cheaper renewables.
If most UK electricity comes from renewables, why is it still expensive?
More than half of UK electricity comes from renewable sources, but renewables don’t usually set the wholesale price. As long as a single gas plant is needed to balance the grid, every unit of electricity is priced as if it came from gas, so cheap renewable generation does not yet feed through to lower bills.
What is decoupling gas and electricity prices?
Decoupling means changing the way wholesale electricity is priced so that gas no longer sets the rate by default. Proposals include a bidding system or splitting the market so renewable generation is priced separately from gas. The aim is for customers to pay closer to the average cost of generation rather than the most expensive unit.
Will my electricity bill go down if Labour decouples gas and electricity?
If reform goes ahead and works as intended, wholesale electricity costs should fall, particularly during periods of high renewable output. That should feed through into lower unit rates on the price cap and on standard variable tariffs. The exact savings depend on the design of the reform and how often gas is still needed on the grid.
How can I protect my bills from gas price spikes today?
The most direct way to protect yourself from gas price spikes is to switch to a fixed rate tariff, which locks in your unit rates for the length of the deal. Reducing your energy consumption – through insulation, smart heating controls and lower-wattage appliances – also limits how exposed you are to wholesale price changes.
Sources: The Guardian, Sky News, GOV.UK – Review of Electricity Market Arrangements, Ofgem.
