Breaking the link between gas prices and home electricity bills is a step in the right direction – but government must go further to tackle Highland fuel poverty.
That’s the view of Inverness, Skye and West Ross-shire MP Angus MacDonald, after he reacted to an announcement by the UK government this week.
Energy Secretary Ed Miliband and Chancellor Rachel Reeves announced moves to break the link between electricity prices and the volatile wholesale price of gas – something long called for by campaigners who say it leads to disproportionately high bills.
But Lib-Dem MP Mr MacDonald believes more is still needed and has called on the government to go further to help Highland communities facing extreme fuel poverty.
Under the current system, electricity prices are effectively set by the cost of gas, because power is priced at whatever the most expensive source needed at any given moment costs, almost always a gas-fired power station.
This means that when gas prices surge, as they did following Russia’s invasion of Ukraine and the current Iranian blockade of the Strait of Hormuz, electricity bills rise with them, even for households whose power comes entirely from wind or solar.
The government has announced that older low-carbon electricity generators, which supply around a third of the UK’s power, will be offered voluntary long-term fixed-price contracts, shielding consumers from future gas price spikes. Generators that choose to remain outside these contracts will be subject to a new windfall tax.
Chancellor Reeves also confirmed the Electricity Generator Levy will be extended beyond its scheduled 2028 conclusion, with the rate rising from 45 per cent to 55 per cent from July 1.
Responding to the announcement, Angus MacDonald MP said: “Renewable energy is far cheaper to generate than oil and gas, yet in the Highlands, where energy generation exceeds local demand twelve-fold, 47 per cent of households still experience fuel poverty.
“The coupling of electricity prices to wholesale fossil fuel costs on the international market is a big part of this. This is an issue I have raised repeatedly with Energy Minister Michael Shanks, going back to February 2025, and it was also a Liberal Democrat commitment in our 2024 manifesto. The government may be late to the party, but today’s announcement is welcome nonetheless.
“However, if Ed Miliband is serious about accelerating the shift to renewables, he should go further and make concrete commitments to the communities whose land will host the energy infrastructure.
“The government’s decision to increase the Electricity Generator Levy means it will be collecting significantly more in taxes from windfarms. That money should be used to fund meaningful community benefit packages — ensuring that those who host the infrastructure are not left behind but instead share properly in the wealth their land helps to create.
“We need help. In the Highlands, fuel costs for our cars and the distances we must travel to access essential services mean our living costs are exceptionally high. The Treasury is on track to collect an extra £2 billion over the next three months as a result of higher fuel prices.
“This windfall should be used to help those most affected: by cutting fuel duty by 10p, zero-rating VAT on LPG and heating oil, and cutting bus and rail fares for three months.”
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