UK eyes French-style energy reforms as Sunak backs away from further windfall tax

Analysts said the move made sense but would do little to ease the immediate pressure on households given the time taken to bring in any reforms.

Tom Edwards of energy consultancy Cornwall Insight, said: “Reform of the electricity market is necessary for meeting the demands of a net zero world and having a 21st Century system, but it is unlikely to fix the cost of living crisis this winter.

“This is a change that will take a long time to implement, possibly around two to three years.”

Currently, less than 40pc of Britain’s electricity is generated in gas-fired power plants. But their important role in the electricity system means that gas effectively sets the price of electricity across the market.

It means that consumers are seeing less benefit in their bills from other sources of generation which do not have gas fuel costs, such as wind and solar panels. With the role of these in electricity generation growing, so is the case for market reform.

It comes as Mr Sunak is believed to be mulling a windfall tax on electricity companies who have benefited from high wholesale prices in recent months, having recently introduced one on North Sea oil and gas producers.

He is facing a push-back from industry figures who argue it could deter vital investment in energy, however, with many arguing wider market reform should take priority.

The UK’s current inflation rate of 9pc compares to inflation in France of 5.8pc. The French government has helped keep household energy bills down after ordering its state-owned electricity company, EDF, to sell more power at artificially lower rates to rivals.

France’s electricity market is markedly different to the UK’s, dominated by EDF’s nuclear power plants, but wholesale prices have also risen there amid lower nuclear output and a tight electricity market across Europe. EDF has said the move will cost it up to $8.4bn.

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