Drax is calling for wider reform of UK electricity costs as the government prepares to remove VAT from domestic electricity bills for six months from 1 October.
The temporary VAT cut follows a 13% increase in Ofgem’s household energy price cap and is expected to reduce the annualised cap by around £45. Drax argues that the measure should be the starting point for a broader review of how electricity is priced and how policy costs are funded.
The central issue is the gap between electricity and gas costs. Electricity bills carry policy charges that are not applied in the same way to gas, making power relatively expensive even as the UK encourages households and businesses to electrify.
UK businesses pay around 45% more for electricity than the G7 median, according to figures cited by Drax, while four in ten companies have reduced investment because of energy costs. High power prices can also affect where electricity-intensive sectors, including data centres, choose to locate.
Drax supports moving green levies away from electricity bills and funding them through general taxation or another broader mechanism. The aim would be to reduce the direct cost of electricity without removing support for energy policy commitments.
The company also wants any reform to provide long-term certainty. Temporary measures may lower costs in the short term, but large energy and industrial projects are planned over decades. Drax argues that companies considering investments lasting 25 years or more need confidence that the policy framework will remain stable.
Electricity demand is expected to rise as more transport, heating and industrial processes move away from fossil fuels. At the same time, greater use of wind and solar generation increases the need for flexible capacity that can respond when renewable output changes.
Drax Group plc (LON:DRX), trading as Drax, is a power generation business. The principal downstream enterprises are based in the UK and include Drax Power Limited, which runs the biomass fuelled Drax power station, near Selby in North Yorkshire.
