- Energy companies, consumer groups and manufacturers demand action on electricity levies in open letter to Ed Miliband
- Current policies are making clean energy and low-carbon tech unaffordable
- Levies between gas and electricity need rebalancing, group says
In open letter to Ed Miliband, Secretary of State for Energy and Climate Change, Electrify Britain along with 35 companies, consumer groups and low-carbon tech manufacturers have called upon the government to remove electricity levies on energy bills to fight fuel poverty and speed up the roll out of heat pumps in the UK.
In a letter signed by energy suppliers like Octopus, OVO Energy, E.ON and EDF, trade bodies like the Heat Pump Federation, consumer groups like Citizens Advice, and low-carbon tech manufacturers like Aira and Kensa – Electrify Britain urged the government to remove the levies that are holding back the electrification of Britain .
While the letter commended Miliband on progress made in his Clean Power Mission, it said the government’s current policy on energy bills – which includes levies on electricity – meant that low-carbon technology was not affordable for a significant number of households.
Levies on electricity, also known as ‘green levies’, account for about 16% of an average energy bill. They are used for providing support for vulnerable households, maintaining the National Grid and financing renewable energy projects.
Data from Ofgem
However, this current policy is part of the reason why electricity is almost four times more expensive than gas, a phenomenon known as ‘the Spark Gap’ that is holding the UK back in its efforts to decarbonise.
The call to cut levies on electricity follows a report in 2024 from Cornwall Insight which also found that heat pump adoption is being hamstrung by the way bills are calculated.
According to the letter, levies are leading many “dependent on older, less efficient electric heating appliances with bills they struggle to afford”.
“With the government’s policy levies on energy bills, which are almost entirely on electricity, electric technology and appliances are not always the easy choice for consumers that they should be,” the letter read.
It went on to say that current policies are giving fossil fuels a “de facto subsidy” over electricity and urged ministers to enforce a “level playing field”.
Heat pumps, the letter said, were a classic example of a low-carbon technology that would cost less to run than a fossil fuel equivalent – a gas boiler – if levies were reformed.
“The best option would be to remove levies from all energy bills, but we appreciate that, given the current economic environment, this is likely not possible”, the letter read.
It called for a “rebalancing of levy schemes between electricity and gas”, stating that any changes to how policy costs are applied to electricity and gas must be “mitigated by better targeted bill support for households”.
It also suggested that policymakers could instead support a “redistribution of overall levy cost rather than individual levies”, which it said would “create a more coherent, flexible, transparent and fairer levy system” across gas and electricity.
“The heating and transparent transitions will take years and trade-offs are necessary, but moving to a smarter, lower cost system that protects British households from volatile international gas markets is critical for economic growth.”
You can read the text of the letter in full below:
Rt Hon Ed Miliband MP Secretary of State for Energy Security and Net Zero
28 March 2025
Dear Secretary of State,
You have made tremendous progress already in your Clean Power Mission. We are writing to you today to support you in making further progress on making it easier for people to benefit more directly from a cleaner power supply.
British people and industry are paying some of the highest electricity prices in the world. We ask that you initiate a consultation process to urgently address Britain’s high energy bills. This should include policy levy reform.
You are right that moving to a more electrified energy system can cut costs for all, greatly enhance energy security by shielding the economy from gas markets, and lower pollution.
But with the government’s policy levies on energy bills, which are almost entirely on electricity, electric technologies and appliances are not always the easy choice for consumers that they should be.
The classic example is a heat pump. Its efficiency means it should cost less, sometimes much less, to provide the same heating service as a gas boiler, but the levies on electricity can stop this from happening.
If the government wants people to adopt electric cookers, heating, and cars, it must stop giving older technologies and fossil fuels a de facto subsidy over electricity. At minimum, we need a level playing field.
High prices and levies today are leaving many of the most vulnerable people dependent on older, less efficient electric heating appliances with bills they struggle to afford. We should upgrade these old appliances to modern equivalents to cut bills and expand the potential for flexible energy management.
Levy reform should ensure a fair distribution of costs for people, create more routes to reduce energy bills overall, be compatible with tackling climate change, and be as economy-wide and technology-agnostic as possible.
The Climate Change Committee’s advice is clear: we must make electricity cheaper if we are to electrify and decarbonise heating and transport, the two largest sources of UK greenhouse gas emissions.
But even if climate change was not happening, it would still be right to electrify. Our dependence on gas imports exposes every household with a gas boiler, and the entire economy, to the erratic international gas markets that the UK cannot influence.
The best option would be to remove the levies from all energy bills, but we appreciate that, given the current economic environment, this is likely not possible.
We would also support a rebalancing of levy schemes between electricity and gas. Any changes to how policy costs are applied to electricity and gas must be mitigated by better targeted bill support for households who are struggling most with energy costs, as recommended by Citizens Advice, Energy UK, and Nesta.
Another option we would support is a redistribution of overall levy cost rather than individual levies, to create a more coherent, flexible, transparent, and fairer levy system across gas and electricity. There is more than one way to do this and as with levy scheme rebalancing it would require accompanying fuel poverty support. Individual signatories can provide more details through consultation.
All of these options should be combined with wider energy bill reform and policies to ensure those in most need are not unfairly penalised. The heating and transport transitions will take years and trade offs are necessary. But moving to a smarter, lower cost system that protects British households from volatile international gas markets is critical for economic growth.
We would not support a new levy on gas consumption to subsidise the operation of specific electric technologies. This will make an incoherent system worse and undermine public perceptions of electric technologies as something being forced upon them.
There are other options, too, which individually we will provide as part of the consultation process. The important thing is that the government makes progress on this long overdue policy. We ask that the government consults as soon as is possible so the energy and charity sectors can feed back their conclusions after three to four years of debate, with the urgency that people and industry deserve.
Yours sincerely,
Electrify Britain
E.ON
Aira
Association for Decentralised Energy
BEAMA
Cadent
Centre for Net Zero
Citizens Advice
Clarion Housing Group
Community Energy England
EDF Energy
Electrical Contractors’ Association
Energy Saving Trust
Energy Systems Catapult
EVA England
Green Alliance
Heat Pump Association
Heat Pump Federation
Kensa
MCS Foundation
Mixergy
National Energy Action
Nesta
Octopus Energy
OVO Energy
Places for People
PlugMeIn
Renewable Energy Association
Renewable UK
Schroders Greencoat
Sero
So Energy
Tepeo
Vaillant
