The Electricity Generator Levy, a windfall tax on older renewable and nuclear generators, rose from 45% to 55% on revenue earned above £82.61 per megawatt hour [1,2].
The increase is part of a wider package announced by the Prime Minister, the Chancellor and the Energy Secretary in April, explicitly designed to weaken the relationship between international gas prices and Great Britain’s wholesale electricity price, by encouraging generators to move onto fixed-price Wholesale Contracts for Difference instead of taking windfall profits when gas spikes[3].
It is, in principle, an attempt to fix a problem John Haw, CEO of Fidelity Energy, has been pointing to for some time. Gas has set the price of UK electricity around 60% of the time so far this year, down from more than 90% in 2021[4], but still high enough that a renewable-heavy grid keeps paying gas-driven prices. The mechanism behind the levy increase makes sense. The question Fidelity Energy is raising is what it actually does for a UK business opening its energy bill this July, and the honest answer is not very much, not yet.
Fidelity explains what this tax change actually does
The levy applies to the receipts of around 50 generator groups, not to the price a business pays its supplier. The government’s own assessment is that the change is unlikely to affect retail electricity prices for households[2], and the same is true for businesses. There is nothing in how the levy works that brings costs down this summer. The structural objective, encouraging more generators onto fixed-price contracts so that gas spikes stop flowing straight through to bills, is a multi-year shift, not a switch that gets flipped in July.
That gap between the policy announcement and the bill landing on a finance director’s desk is exactly the kind of thing John Haw has seen catch businesses out before. People hear that the government is doing something about energy prices and assume that something arrives quickly. It rarely does.
“The principle here is right. Gas has been setting the price of UK electricity far more often than it should, given how much renewable capacity we’ve built, and anything that gets generators onto fixed-price contracts instead of windfall gas pricing is a step in the right direction. But people need to be honest about the timeline.”
“This is a tax change on generators. It is not a discount on anyone’s bill, and conflating the two is just a mechanics error. I’d rather be straight about that than let the framing get away from what’s actually happening. The biggest misconception businesses have about energy costs right now is that they might come down. People keep holding out for lower rates, and unfortunately they very rarely materialise on the schedule people expect.”
John Haw, CEO of UK energy procurement firm Fidelity Energy
What’s actually inside a business energy bill
It is worth UK businesses understanding how much of their energy bill is policy rather than market in the first place. The wholesale commodity, the bit that actually moves with gas and oil prices, is a minority of what most businesses pay. The rest is made up of network charges, policy levies and government-imposed costs that do not move with the market at all. Adding a new lever, even a sensible one, does not change that underlying structure, and it does not reduce the other charges already sitting on a bill.
The current price cap illustrates the disconnect well. Despite wholesale gas and winter 2026 contracts both falling by around 15% since the end of March, the price cap for July to September 2026 is rising 13%, from £1,641 to £1,862 a year for a typical dual fuel household[7], because the cap reflects wholesale pricing from three months earlier rather than the market today.
Network charges add a further layer of complexity. Ofgem’s RIIO-3 price control is set to push network charges up significantly from April 2026, funding upgrades that matter for the long-term resilience of the grid but adding to bills in the meantime, on top of additional policy costs already in the pipeline[8]. None of this is unique to the EGL. It is simply how a heavily policy-weighted bill behaves, and it is exactly why a single tax change on generators, even one moving in the right direction, was never going to show up as a discount.
“Energy costs get blamed on suppliers and brokers more than anyone else, but it’s the government that has the biggest say in where prices end up. Well over 60% of a typical bill is non-commodity charges, which is tax by another name.”
He also adds that, “this levy increase is just another lever being pulled on top of all the others, and it might do real good over the next few years. But don’t mistake a tax change on generators for a reduction in what you’re being asked to pay. They’re two different things, and mixing them up is how people end up disappointed.”
John Haw, CEO of UK energy procurement firm Fidelity Energy
Fidelity on what the CBI’s warning means for businesses
The EGL increase has not gone unchallenged. When the wider package was first announced in April, the CBI welcomed the principle of decoupling gas and electricity prices but warned explicitly that government messaging on next steps for the levy needed to be backed by clear timelines, cautioning that uncertainty was already undermining investor confidence[5]. That warning sits inside a much larger debate. Energy UK and the CBI have since published a joint report calling for a robust, cross-government national strategy on business energy costs.
Two separate benchmarks stand out from that report: UK industrial electricity prices sit nearly two-thirds above the median price across all International Energy Agency member countries, a broad international comparison spanning dozens of economies, and separately, the UK has the highest industrial electricity prices of any G7 country, a narrower comparison against the world’s largest advanced economies[6]. Almost 90% of businesses report rising energy costs over the past three years, and four in ten say they plan to scale back investment as a direct result[6].
This is the context the EGL increase sits inside, and it’s a context that’s been largely absent from how the policy has been covered so far. A tax rise on generators lands differently against a backdrop where the dominant business concern is not the structure of the levy but the overall trajectory of cost and policy stability.
“The CBI’s warning about investor confidence is worth taking seriously, and it points to something bigger than this one levy. Businesses don’t just respond to where prices are today, they respond to whether the rules look stable enough to plan around. Stacking policy change on policy change, even good policy change, has a cost if it isn’t communicated properly.
“Right now the conversation that matters is UK businesses paying some of the highest industrial electricity costs in the G7, and that’s the conversation this levy needs to be understood within. Not as something that happened in isolation.”
John Haw, CEO of UK energy procurement firm Fidelity Energy
What Fidelity is telling clients to do next
None of this changes the advice Fidelity Energy is giving clients renewing contracts in the months ahead. The structural reform underway, the EGL increase, the move to Wholesale Contracts for Difference, the broader push to weaken the gas-electricity link, is worth watching over the next two to three years. It is not a reason to delay a procurement decision now. Businesses that wait for policy reform to show up on a bill before acting are making the same mistake John Haw has flagged consistently: assuming relief is closer than it is, and paying a near-term price for the wait.
“My advice to clients hasn’t changed because of this announcement, and that’s really the point I’d want businesses to take from it. This is a genuinely useful long-term reform, and I’d encourage people to understand it rather than dismiss it. But it doesn’t change what you should be doing about your own contract today.”
“The businesses that get this right are the ones securing their position based on where the market actually is, not the ones waiting on a policy change to filter through over several years. Leave a renewal too late hoping government intervention bails you out in the meantime, and you’ll almost certainly pay a lot more for it. The nearer your contract end date, the worse the price you tend to get. That’s true whether there’s a levy increase in the news or not.”
John Haw, CEO of UK energy procurement firm Fidelity Energy
[1]questions-statements.parliament.uk/written-statements/detail/2026-04-21/hcws1528
[2]gov.uk/government/publications/increase-in-the-rate-of-the-electricity-generator-levy
[3]Policy intent to break the gas-electricity price link and encourage take-up of Wholesale Contracts for Difference: Herbert Smith Freehills Kramer, 23 April 2026; KPMG TaxNewsFlash, 30 April 2026.
[4]carbonbrief.org/qa-how-the-uk-government-aims-to-break-link-between-gas-and-electricity-prices/
[5]cbi.org.uk/media-centre/articles/cbi-responds-to-plans-to-boost-clean-energy-and-decouple-gas-and-electricity-prices/
[6]cbi.org.uk/articles/cutting-business-energy-costs-the-case-for-action/ and energy-uk.org.uk/publications/cutting-business-energy-costs-the-case-for-action/
[7]Q3 2026 price cap rising 13% from £1,641 to £1,862 for a typical dual fuel household, despite wholesale gas and winter 2026 contracts falling approximately 15% since the end of March 2026: NRLA Business Energy Market Update, June 2026, citing Ofgem price cap data.
[8]Network charges set to rise significantly from April 2026 under Ofgem’s RIIO-3 price control, alongside additional policy costs including the Network Charging Compensation scheme uplift, Bill Discount Scheme for transmission network infrastructure, Dispatchable Power Agreement and Gas Shippers Obligation: ‘Cutting Business Energy Costs: The Case for Action’, CBI and Energy UK, 2026.
