Last updated: 29 March 2026
By Stiv · Design, technology and personal finance
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The idea of an energy profits cap in the UK just got its most high-profile backer yet. Lord Richard Walker, the government's Cost of Living Champion and executive chairman of Iceland, has called on ministers to impose a temporary cap on the profits of energy and petrol companies to stop them cashing in on the Middle East crisis. With bills forecast to rocket again by summer, we think he's absolutely right. In fact, we'd go further.
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What Richard Walker is proposing
Writing in the Sunday Times, Lord Walker urged the government to consider a temporary profit cap on energy producers and retailers. His argument is straightforward: when a geopolitical crisis sends wholesale prices soaring, energy companies should not be free to pocket windfall profits while households struggle to keep the heating on.
Walker was appointed Cost of Living Champion by the Prime Minister in February 2026. He reports directly to No 10 and has already summoned energy bosses and the Competition and Markets Authority (CMA) to Downing Street in what he described as a warning against opportunistic profiteering.
The proposal would go further than the existing energy profits levy (the windfall tax introduced in 2022) by directly restricting how much companies can earn during periods of extreme market volatility, rather than simply taxing profits after the fact.
Why bills are about to jump again
The timing of Walker's intervention could not be more relevant. The Ofgem energy price cap falls to £1,641 from April, a welcome 7% drop. But that relief looks set to be brutally short-lived. Energy consultancy Cornwall Insight now forecasts the July price cap could rise to £1,973, an increase of £332 in a single quarter. That would be the highest level since July 2023, during the worst of the post-Ukraine crisis.
The driver, once again, is gas. Following the US and Israeli strikes on Iran in late February, wholesale gas prices have more than doubled. The Strait of Hormuz, through which roughly 20% of the world's oil supply passes, has been effectively blockaded. Oil is trading above $100 a barrel and gas markets remain deeply unsettled.
According to the House of Commons Library, even with the April reduction, UK energy bills will still be 35% above their pre-energy-crisis levels. An Early Day Motion tabled in Parliament notes that nearly 3 million people in England are already living in fuel poverty, and typical bills are £478 higher than in October 2021. For a full breakdown of how the cap works, see our Ofgem price cap 2026 explainer.
Why an energy profits cap in the UK makes sense
Here's the fundamental problem with how the UK energy market works. Gas sets the price of electricity roughly 85% of the time, according to government ministers and analysis from Carbon Brief. That means even when half of our electricity comes from cheap wind and solar, the wholesale price is still pegged to whatever gas costs on the international market.
Windfall profits for doing nothing different
When gas prices spike, as they have done twice now in four years, renewables generators receive inflated prices they never needed. The result is billions in windfall profits for companies that are simply selling the same wind and sunlight they always were, while households absorb the full cost of a crisis they had no part in creating.
A temporary energy profits cap would directly address this. It would allow energy companies to earn a fair return on investment while preventing them from banking crisis-driven windfalls at consumers' expense. Walker himself made the distinction clearly: profit is fine, profiteering is not.
But we'd go further: decouple prices and consider nationalisation
A temporary cap is a sensible emergency measure. But the UK needs structural reform, not just sticking plasters. Two ideas deserve serious attention.
Break the link between gas and electricity prices
The marginal pricing system, where the most expensive generator (usually gas) sets the price for all electricity, is outdated. Spain has already largely broken this link. Analysis by climate think tank Ember, reported by Carbon Brief, shows that gas set the electricity price in just 15% of hours in Spain so far in 2026, down from 52% in 2021. In the UK, that figure is still around 85%.
Research from Common Wealth, published on 18 March 2026, proposes shifting to a single buyer model where the National Energy System Operator (NESO) purchases power directly from generators at regulated prices, removing gas from the wholesale market entirely. Ecotricity founder Dale Vince has backed a similar approach, working with Cornwall Insight to show it could be implemented within two years.
Miliband is now listening
In a significant development since Walker's intervention, Energy Secretary Ed Miliband told Labour MPs on 24 March 2026 that he is actively exploring how to decouple electricity prices from gas. He described the move as "complicated, but possible". He is understood to be looking closely at Dale Vince's "Breaking the Link" report, which argues that even with 95% clean power, high gas prices would persist under the current market rules unless the pricing mechanism itself is reformed.
This is encouraging. Contracts for Difference (CfDs), which pay renewable generators a fixed price regardless of the wholesale market, already cover 13% of UK generation, up from 7% in 2022. By 2030, they could cover half. Accelerating this transition alongside genuine market reform would structurally reduce the influence of gas prices on household bills.
Nationalise a major player to create real competition
This is where the conversation gets properly interesting. The UK's current energy market gives us the worst of both worlds: the state is already forced to intervene massively during every crisis (the Energy Price Guarantee alone cost tens of billions), while private companies collect the upside during boom periods.
A publicly owned energy retailer, operating at cost rather than for shareholder returns, would inject genuine competition into the market. It would not need to undercut every tariff. It would simply need to demonstrate what energy actually costs when profit extraction is removed from the equation. That transparency alone would discipline the rest of the market.
What the research says
Common Wealth's research found that nationalising legacy Renewables Obligation (RO) wind and solar assets, along with nuclear and hydro plants, would deliver the greatest price savings for consumers. Their proposal would see these assets moved onto fixed-price contracts well below current wholesale rates.
The counterargument, that a nationalised company would still buy gas at global prices, misses the point. The goal is not to control the gas market. It is to stop gas from controlling the price of electricity that is already being generated cheaply from domestic renewable sources. A publicly owned company, combined with a reformed pricing system, would pass those savings directly to bill payers.
What you can do right now
While we wait for politicians to catch up, there are practical steps you can take today to reduce your exposure to volatile gas prices.
Switching to a supplier that prioritises renewable energy and offers smart tariffs is one of the most effective moves. Octopus Energy consistently tops customer satisfaction tables and offers 100% renewable electricity. Their Agile and Tracker tariffs let you benefit from cheaper wholesale prices when renewables are generating strongly. If you switch using a referral link, you also get £50 free credit on your bill. For a comparison of how those tariffs work, see our Octopus Agile vs Tracker guide.
Beyond switching, consider whether reducing your gas consumption could help. Even modest reductions can make a meaningful dent in your bill, and every unit of gas you don't burn is a unit whose price no longer matters to you. If you're looking at ways to cut household costs more broadly, our guide to cutting household bills covers practical tactics beyond energy.
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The bottom line
Richard Walker's call for a temporary energy profits cap in the UK is a welcome step. It acknowledges what millions of households already know: the current system is rigged in favour of energy companies, and consumers are paying the price every time a geopolitical crisis erupts.
But capping profits during crises treats the symptom, not the cause. The real solution is structural: decouple electricity prices from gas, accelerate the transition to domestically generated renewable power, and seriously consider public ownership of key energy assets to ensure the benefits of cheaper green energy actually reach the people paying the bills.
Ed Miliband's signal that decoupling is "complicated, but possible" is the most concrete indication yet that government is listening. Whether that translates into action before the July price cap hits is another matter entirely. Until structural reform happens, the UK will remain trapped in a cycle where every global shock translates directly into higher bills for ordinary people, while energy companies continue to profit from a system designed for a different era.
This post is for informational purposes only and does not constitute financial advice. Energy prices and forecasts are subject to change. CoolCuration may earn a commission or referral bonus if you sign up through links on this page, at no extra cost to you.
Frequently asked questions
What is the energy profits cap proposed by Richard Walker?
Lord Richard Walker, the government's Cost of Living Champion, has called for a temporary cap on the profits that energy and petrol companies can make during periods of crisis. The aim is to stop producers and retailers from exploiting geopolitical events to earn windfall profits at consumers' expense. It would go beyond the existing energy profits levy by directly limiting earnings rather than taxing them after the fact.
How much are energy bills expected to rise in July 2026?
Cornwall Insight forecasts the Ofgem price cap could rise to £1,973 from July, up £332 from the April level of £1,641. This is driven by surging wholesale gas prices linked to the conflict involving Iran and the disruption of oil and gas supplies through the Strait of Hormuz. The final figure depends on how long the disruption lasts and will be confirmed by Ofgem on 27 May 2026.
Why does gas set the price of electricity in the UK?
The UK uses a marginal pricing system where the most expensive generator needed to meet demand sets the wholesale price for all electricity. Because gas-fired power stations are often the marginal generator, gas prices effectively determine the cost of electricity for consumers. In 2025, gas set the price around 85% of the time, even though it generated roughly a quarter of total output. This means UK households do not benefit fully from the low cost of wind and solar generation.
What does decoupling electricity and gas prices mean?
Decoupling means reforming the market so that electricity generated from renewables, nuclear and hydro is priced independently of gas. Proposals include a single buyer model where a national body purchases all power at regulated rates, or expanding Contracts for Difference so more generators receive fixed prices unaffected by the wholesale gas market. Spain has already largely achieved this, with gas setting the electricity price in only 15% of hours. Energy Secretary Ed Miliband told Labour MPs on 24 March 2026 that he is actively exploring this approach.
Would nationalising an energy company actually lower bills?
A publicly owned energy company would remove the profit motive from retail supply, potentially passing savings directly to consumers. Research from Common Wealth suggests the biggest savings would come from bringing legacy renewable, nuclear and hydro assets onto fixed-price contracts below current wholesale rates. Critics argue a nationalised company would still face global gas prices, but supporters counter that the goal is to stop gas from setting the price of domestically generated renewable electricity.
Can I do anything right now to lower my energy bills?
Yes. Switching to a competitive supplier like Octopus Energy (which offers £50 free credit via referral) is one of the simplest moves. Using a smart meter, reducing gas consumption, and considering a smart thermostat can also help. Fixed tariffs may offer protection if the price cap rises sharply from July as forecast.
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