Energy security minister Grant Shapps said plans will be released this week to decouple the price of electricity from gas after the latter has caused bills to skyrocket.
“On Thursday, we will […] commit to addressing the imbalance between gas and electricity costs in household bills, to make electricity cheaper for the long term,” he wrote in the Sun.
He claimed addressing “distortions” in the market, caused by gas being used as a benchmark for other prices, could save households up to £100 a year in bills.
This could be done by reducing policy costs on electricity bills, which are around £165 under Ofgem’s April price cap that limits suppliers to charging £3,280 on an annual basis.
Policy costs account for social and environmental schemes that suppliers take part in, with costs passed onto households through bills.
Though accounting for just 5% of a typical dual-energy bill of gas and electricity, policy costs equal roughly 12% of charges for the 2.1mln homes on electric-only heating, having previously made up a larger proportion of the costs.
Levies on gas bills, meanwhile, make up just 3.4% of the costs.
Plans will come as part of the government's ‘Green Day,’ where it is expected to unveil a host of measures to bolster the UK’s energy security.
CitiGroup analysts predict the government may take a new stance on North Sea oil and gas producers by introducing a level where the current 35% windfall tax “ceases to apply”.
A floor level on gas, in particular, could benefit British Gas owner Centrica PLC (LSE:CNA), analysts added, though this depends on the set price.
“In terms of the other announcement, we expect news around bioenergy with carbon capture and storage (BECCS) and Drax Group (LSE:DRX), onshore wind and nuclear,” Citi said.
FTSE 250-listed Drax has hinted it could reroute a £2bn investment into its BECCS project at its North Yorkshire power station, which supplies some 4mln homes, without further government support.
It is set to receive £11bn from publicly funded subsidies by 2027 under the UK’s contract for difference scheme, according to think tank Ember, and also applies for tax breaks from the energy generator levy, which Citi suggested will be left untouched.
The government could also provide further clarity on its nuclear plans, including its first small modular reactor competition, which, with Rolls-Royce Holdings PLC (LSE:RR.) at the forefront, is set to be concluded this year, according to the chancellor.