Octopus energy has urged the upcoming prime minister to overhaul the market
Andy Burnham could slash energy bills by almost £200 a year by reversing one of the previous government’s biggest energy decisions, one the UK’s biggest providers has said.
Octopus Energy has urged the incoming prime minister to overhaul the market and introduce a system that would cut the bill of every home and business in the country – with a typical household saving up to £114 a year.
The firm said families could save a further £75 a year on electricity bills if the government shifted levies into general taxation, with higher earners picking up more of the cost through the tax system. Businesses and industry could save an additional £6bn annually through market reform – unlocking total savings of up to £83 billion by 2050, the firm said.
But the energy giant warned that reforming Britain’s electricity market would take two years and urged Mr Burnham to act as soon as possible.
Greg Jackson, founder and CEO of Octopus Energy, said: “The new prime minister has a golden opportunity to change the direction of energy bills, boosting electrification and slashing costs for families and businesses.
“It’s clear that market reform was rejected without a Plan B, and that the path we are currently on will see bills rise for years to come. Reversing that will put us in line with many OECD countries, cutting costs for everyone without sacrificing clean energy ambitions.
“Indeed, it’ll enable us to get more out of wind farms and pay less, and end the chaos which currently sees British batteries charge when they should discharge, interconnectors import electricity when we have surpluses and export when we have none to spare, and pay eye-watering amounts to gas plants to try to balance this.”
Mr Jackson is a Labour donor and has been an informal adviser to Sir Keir Starmer’s government. He is one of the most dynamic tech innovators and has seen his energy grow from its inception to a £20bn company in a decade.
His intervention is a major challenge to the new government as Mr Burnham has pledged to raise growth in every postcode. It is also a powerful challenge as energy prices are crucial to the government’s war on the cost of living.
It comes as households saw their energy bills climb by £221 a year in July, pushing the average annual electricity and gas bill to £1,862.
The significant rise was fuelled by soaring global energy costs caused by Donald Trump’s war on Iran, and intensified when Iran blocked the critical Strait of Hormuz – a passage through which a fifth of the world’s oil and gas is transported.
Octopus also warned that Britain’s electricity market is wasting billions, explaining that expensive gas often sets the price even when cheap renewable power is available.
Wind farms are switched off when they could be generating, batteries are discharged when they should be charging and interconnectors import power when it should be exported, the energy company said.
Wind farms are paid to switch off because the grid can’t transport all the power they produce, while gas power plants are fired up elsewhere. This added £1.5bn to household energy bills last year alone and is forecast to rise up to £10bn a year by 2030 unless the system is changed, the company warned.
Reforming the market would make the system more efficient, unlock the full potential of wind, batteries, interconnectors and flexible demand, cut unnecessary grid upgrades which could cost £30bn over 21 years, it said.
This would not only cut costs for everyone in the country but also give renewable energy a boost. A further £20bn could be saved, according to Octopus estimates, if the full potential of smart grid flexibility was unlocked.
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