Octopus Energy has issued a stark warning to millions of UK households about the rising tide of energy bills following the government’s recent decision to scrap plans for zonal electricity pricing. The energy giant, one of the largest in the country, argues that abandoning zonal pricing—a system that would have set electricity prices based on regional supply and demand—risks locking consumers into spiralling costs and unnecessary infrastructure expenses.
The government confirmed in early July 2025 that it would ditch the controversial zonal pricing scheme in favour of an as-yet undefined alternative called “Reformed National Pricing.” However, Octopus Energy has criticized this move as little more than a label without any concrete detail, models, or analysis behind it. The company insists that zonal pricing, already in use across much of the OECD, could have been implemented in the UK within 18 months, delivering significant savings and system efficiencies.
Modeling commissioned by Octopus suggests that zonal pricing could unlock bill savings ranging from £3.7 billion to £5 billion annually. Beyond consumer savings, the system would also reduce the necessity for nearly 3,000 kilometres of expensive new grid infrastructure, potentially saving bill payers up to £27 billion in the long term. This is particularly critical as the UK currently faces soaring costs related to grid bottlenecks—nearly £700 million spent in 2025 alone on turning off wind farms when the wind blows and firing up costly gas power plants instead. According to system operator forecasts, these constraint payments are set to balloon to £8 billion annually by 2030.
Greg Jackson, founder and CEO of Octopus Energy, did not mince words: “Electricity bills are spiralling and zonal pricing would have reversed that. The government and generators need to come up with an alternative which will prevent the now seemingly inevitable price rises that will hit over the next few years.” Jackson urged the government to ensure any alternative solution can slash electricity costs by at least £100 to £150 per year, be implemented by 2028, and significantly reduce the need for new pylons and grid infrastructure.
The government’s decision to retain a single national wholesale price for electricity closes a chapter on a heated debate within the energy sector. The Department for Energy Security and Net Zero (DESNZ) stated that this approach supports an “affordable, secure, and efficient energy system.” Instead of zonal pricing, the government plans to deliver a Reformed National Pricing Delivery Plan focusing on reforming Transmission Network Use of System (TNUoS) charges, developing a Strategic Spatial Energy Plan (SSEP), and enhancing battery energy storage capabilities.
Shraiya Thapa, clean energy knowledge lead at law firm Freeths, emphasized the urgency of the delivery plan, saying it must commit to policy proposals now rather than in 2028. “The upcoming delivery plan will need to take the best of REMA’s proposals and possibly new ones to formulate a credible design that both incentivises clean energy investment and has a tangible impact on consumers’ bills by 2030,” she said.
Industry reaction to the government’s rejection of zonal pricing has been mixed but largely relieved. Marc Hedin, head of research for Western Europe and India at Aurora Energy Research, praised the decision for providing “stability for the investment community,” making Great Britain a “low-risk place to invest in renewables.” Chris Matson, partner at LCP Delta, agreed that the announcement “significantly reduces investment risk and increases the likelihood of achieving the Clean Power 2030 ambition.”
Battery energy storage companies have welcomed the decision as pragmatic, with Aazzum Yassir, director of technology and operations at Pulse Clean Energy, calling it “greater stability at a critical juncture in the UK’s energy transition.” Solar Energy UK, meanwhile, supported the rejection of zonal pricing, warning it would have created a “postcode lottery” for power prices, and looks forward to consultations on better integrating battery energy storage into the system.
However, Cornwall Insight’s principal consultant Kate Mulvaney cautioned that while the decision brings clarity, it does not resolve deep-rooted market inefficiencies. She noted, “Presently, consumers face the worst of both worlds: paying wholesale prices that are still driven by volatile gas markets, and premium costs to replace gas in the power system with renewables.”
Octopus Energy, the UK’s largest energy supplier, remains vocal in its opposition to the government’s move. Jack Richardson, Octopus’s head of policy, expressed frustration: “After three years and endless consultations, the only option to cut bills at all has been taken off the table. We’re now back to square one—more consultations, more discussions, more chatter, and a tacit acceptance that some big problems won’t get solved at all. We need concrete bill-cutting policies now. Bills are far too high.”
The debate over zonal pricing has also taken on a regional dimension, particularly in Scotland. Labour energy minister Michael Shanks acknowledged that Scots would have seen their energy bills reduced under zonal pricing due to the country’s abundant renewables. However, he argued the “trade-off” was not worth it, citing concerns that the uncertainty surrounding zonal pricing would have disproportionately affected Scotland and hampered investment in clean power infrastructure.
Shanks warned that charging Scottish electricity users less than those in southern England could pose a “huge risk” to investment north of the border and predicted at least seven years of uncertainty during the transition. This view contrasts with Octopus Energy’s director of regulation, Rachel Fletcher, who pointed out that more complex nodal pricing systems have been implemented internationally in less than four years. Fletcher highlighted Sweden as a successful example, where zonal pricing has attracted over €70 billion in industrial investment, particularly in its renewable-rich northern regions. She suggested Scotland could benefit similarly, with the potential for “negative” energy prices that would effectively pay consumers to use electricity during periods of surplus renewable generation.
Countries such as Australia, Norway, Denmark, and Sweden have all adopted zonal pricing, and Octopus Energy warns that the UK’s single wholesale price system is becoming the exception rather than the rule globally. The company continues to press the government for a credible plan that can deliver real savings for consumers and support the UK’s clean energy transition.
As the UK moves forward, the energy sector faces a critical crossroads. The government’s rejection of zonal pricing brings much-needed clarity but leaves unanswered questions about how to tackle the inefficiencies and rising costs embedded in the current system. With billions of pounds at stake and households grappling with soaring bills, the pressure is on for policymakers and industry leaders to devise solutions that balance investment certainty, consumer affordability, and the urgent need for a greener, more resilient energy future.
