Why does gas affect electricity prices? What the government’s “break the link” plan means for UK homeowners

If you’ve ever looked at your energy bill and thought, “Why does gas affect electricity prices?” You’re asking a very sensible question. 

After all, a growing share of Great Britain’s electricity comes from renewables and nuclear, which the government describes as cheaper sources of power, yet electricity prices can still rise when international gas prices spike.

On 21 April 2026, the government published new plans aimed at breaking the link between gas and electricity prices, with the stated goal of better protecting families and businesses from future energy crises.

 This blog explains what’s been announced, what it’s trying to fix, and what it could mean for household bills over time.

Why does gas affect electricity prices in the UK?

The government’s announcement highlights the core issue: Great Britain is still exposed to volatile international fossil fuel markets. When wars, geopolitical tensions or supply shocks abroad push up global gas prices, the government says electricity bills rise with them, even though much of the country’s electricity comes from cheaper renewables and nuclear.

In simple terms, gas can still have an outsized influence on electricity pricing because it remains part of the electricity mix and the wider market structure can allow gas price movements to feed through into wholesale electricity prices.

That’s why you’ll often see this described as the UK needing to “decouple” electricity prices from gas.

What’s being proposed to reduce gas’s influence on electricity prices?

The government says it wants to reduce the impact that volatile gas prices have on electricity prices by setting out new measures to “break the link”.

 The announcement focuses on two main actions.

1) Voluntary long-term fixed-price contracts for existing low-carbon generators

The government plans to offer voluntary long-term fixed contracts to existing low-carbon electricity generators that are not already on fixed-price contracts.

Key points from the announcement:

• The offer would cover around a third of Britain’s power supply (as described in the text).

• The aim is to protect families and businesses when gas prices spike, by moving more generation onto fixed pricing rather than gas-linked wholesale prices.

• The government states contracts will be offered only where they deliver clear value for money for consumers.

The notes also explain that these fixed contracts are referred to as Wholesale Contracts for Difference (WCfD), and that they will be introduced voluntarily later this year, with an intention to run an allocation process in 2027.

What is a Contract for Difference?

The government’s explainer says a Contract for Difference (CfD) is a long-term contract that guarantees a stable, fixed price for electricity produced by a generator. 

A Wholesale CfD (WCfD) would offer eligible existing generators the option to accept a fixed price, so both they and consumers are no longer exposed to volatile gas-linked electricity prices.

2) Electricity Generator Levy increased to 55%

The government also announced an update to the Electricity Generator Levy (EGL), described as immediate action to tax excess profits when gas prices spike.

The announcement states:

• The levy rate is being raised from 45% to 55%

• The duration is being extended

• The purpose is to ensure an increased proportion of extraordinary revenues generated when gas prices spike is available to government to support businesses and households with cost-of-living impacts

How much is gas still influencing electricity prices today?

The announcement provides several useful figures:

• Gas set the price of electricity around 90% of the time in the early 2020s

• It is around 60% today

• Under the government’s clean energy mission, it is estimated gas will set the wholesale price around half of the time by 2030

• It also states that about 30% of Britain’s power supply is still exposed to wholesale prices set by gas

So if you’re asking “why does gas affect electricity prices?”, part of the answer is: because a meaningful share of generation and pricing is still exposed to gas-linked wholesale pricing, even as the system changes.

What does this mean for homeowners and energy bills?

This is the part people care about most. The government’s framing is about protection from volatility and more stable bills, particularly during international gas price spikes.

Realistically, for homeowners, the potential outcomes (as intended by the policy) are:

• Less exposure to sudden gas price shocks feeding into electricity prices

• More stability as more low-carbon generation moves onto fixed-price arrangements

• A gradual shift away from the “fossil fuel rollercoaster” effect on household budgets

What it does not guarantee (based on the text) is an immediate, universal bill reduction for every household. It’s a structural reform aimed at reducing vulnerability to future shocks.

Other measures announced alongside the “break the link” plan

The announcement also sets out additional measures aimed at clean, homegrown power and household support, including:

• Boiler Upgrade Scheme grant increased to £9,000 for properties heated by oil and LPG (England and Wales), to help households electrify heating

• Additional funding for social housing upgrades and solar installations (including an additional £100 million for the Social Housing Fund, subject to approvals, and support for up to 57,000 solar installations this financial year)

• Support for rooftop solar on a further 100 schools and colleges this year, with up to £40 million government investment (subject to approvals)

• Plans to unlock renewable capacity on public land (the announcement says this could unlock up to 10 GW, powering the equivalent of around 5 million homes)

• Planning and grid connection reforms to speed up delivery

• Plans and consultations to make EV chargers, solar panels and heat pumps easier to install (including consultations this summer on permitted development rights for air source heat pumps)

What should homeowners do now?

Even if electricity pricing becomes less tied to gas over time, the most reliable way to reduce heating costs and improve comfort remains:

• Cut heat loss (insulation, draught-proofing, sensible ventilation)

• Use heating controls properly (timers, thermostat schedules, room-by-room control where possible)

• Avoid heating unused rooms unnecessarily, especially in spring and autumn

If you’re considering electric heating or other home upgrades, focus on control and suitability for your property, not just headlines.

Want to know more?

If you want a practical plan for improving comfort and control at home, including modern electric heating options, get in touch for a free quote today. 

We’ll help you understand what’s changing in the energy industry and what makes sense for your home.

Call 0800 5999 109 or email [email protected] for more information or a free quote.

Tags: General Guides, News.