Octopus Energy shares bold plan to slash people's bills

Families and businesses could slash their energy bills by 2028 under sweeping reforms to how electricity prices are set, a major supplier has claimed.

Octopus Energy says moving to a “zonal pricing” system, which sets prices based on local supply and demand, would unlock huge savings, especially for heavy industry, and bring Britain in line with most other advanced economies.

The proposals are opposed by some energy giants such as Centrica, which owns British Gas and could suffer a major blow to income and profits.

At the same time, it is claimed the change would reduce incentives for companies to build new wind and solar farms. Some are also opposed to the idea that power bills might be different depending on region.

However, these concerns have been rejected by Greg Jackson, chief executive of Octopus, who said: “Economic growth needs lower energy prices for businesses and families. Zonal pricing could deliver huge savings for everyone by 2028.

“Of course, some incumbents don’t like it, just like Blockbuster didn’t like Netflix, but Blockbuster couldn’t lobby their way out of it.”

Octopus claims Britain’s outdated “one-size-fits-all” national pricing system is helping to drive sky-high bills, despite the growth of cheap renewable energy.

At present, the same wholesale price is charged whether power comes from a wind farm in Scotland or a gas plant in the Midlands. This, Octopus argues, leads to colossal inefficiencies and waste, with the country having already paid £500million this year alone to switch off wind turbines in one region while paying to ramp up gas plants elsewhere.

“Britain’s energy intensive businesses are being battered by energy prices,” said the company.

“Our factories and data centres have 50% higher prices than French and German factories, and 3–4 times higher than Norway and Sweden. But it doesn’t have to be this way.”

It cited new research from FTI Consulting which suggests that zonal pricing could deliver “conservative” annual savings of up to:

£15million for the Scunthorpe steelworks

£5.98million for a car factory in the North East

£2.52million for a data centre in Hertfordshire

£3.89million for a Hull chemicals plant

£19million for a glassworks in Scotland

£14.5million for a paper mill in North Wales

These industries are among around 370 large firms currently receiving taxpayer-funded discounts through the Government’s so-called ‘British Industry Supercharger’ scheme, designed to offset policy and network costs.

But the subsidy is funded by a levy on all other energy users – including households - pushing up bills.

The Supercharger is set to cost up to £1.12billion annually by 2030, and £10.7billion across the next decade – or even more if lobbying efforts to expand it succeed.

Octopus argues that switching to zonal pricing would cut £900million off the cost of this scheme over ten years, allowing government to support struggling industries at far lower cost to everyone else.

Crucially, the savings wouldn't just benefit major manufacturers. Zonal pricing would cut overall electricity costs by at least £3.7billion annually, says Octopus, easing the burden on households already facing the highest tax levels in decades and rising mortgage payments.

However, the reform isn’t without losers. Some large businesses in areas with limited nearby generation – such as Port Talbot steelworks – could find themselves worse off as wholesale savings are outstripped by reductions in government support.

Even so, Octopus says the solution isn’t to abandon reform but to “develop a better mechanism for supporting our critical industries so nobody loses out at a lower cost overall”.

As the nation eyes ambitious decarbonisation targets and fights to keep industry alive, Mr Jackson says now is the time for bold change: “Zonal pricing delivers lower electricity costs and a more efficient system. It means government can support those who still need it – but with less money. Everyone can win.”