Energy Market Reforms

Lord Sikka Excerpts

Tuesday 4th November 2025 Lords Chamber

[Baroness Hayman of Ullock (Lab)]

As I have said, one of our key priorities is to reduce bills for consumers, particularly for vulnerable customers. We will look at all aspects of how best to do that.

[Lord Sikka (Lab)]

My Lords, energy companies made £30 billion profit last year, which is over £500 per household. This fuels inflation and poverty. Some 128,000 people die in fuel poverty each year. There is an urgent need to end profiteering by excluding gas-generated electricity from Ofgem’s marginal pricing formula. Can the Minister explain why, after 35 years, Ofgem’s pricing formula has not been reformed?

[Baroness Hayman of Ullock (Lab)]

My noble friend asks about marginal pricing and refers to gas, because gas and electricity prices have been coupled together for many years. The market currently operates on the principle of marginal pricing, and the cost of electricity often tracks the cost of gas because gas generation frequently sets the wholesale price. It is a complex area. There are good reasons why the electricity market operates on that basis. Comparable countries tend to operate in this way as well. Over time, we need to rely less on gas, which means that electricity prices will become increasingly detached from the price of gas and be more frequently set by other generation, such as renewables. We see that as the way to bring prices down to support vulnerable people and to enable them to pay their bills. That is why our focus is on increasing renewable energy.