The £28bn Upgrade: Why your fixed charges are rising
Plus: Ovo's financial wobble & the 2040 Carbon Tax explained.
Joshua Winterton
December 7th, 2025
A quick note from me (Josh):
Welcome to The George Briefing. Each week, my co-founder Lu and I use our tech-focused lens to go directly to the source of change in the UK energy market, the official publications from Ofgem and the UK Government. Our goal is to cut through the noise and deliver the key regulatory developments and changes that will impact your business's bottom line, all explained in simple, actionable terms.
This weeks developments are:
The £28bn Upgrade: Why Your Fixed Charges Are About to Rise
The 2040 Carbon Tax: Green Levies Are Here to Stay
The Ovo Warning: Is Your Supplier Financially Secure?
This Week's Market Pulse
Hidden Gems Also Worth Reading
LATEST DEVELOPMENTS
Ofgem
Image source: Gemini / Meet George
The Spark: Get ready for higher network charges on your energy bills from 2026, as Ofgem greenlights a massive £28 billion investment to future-proof the UK's energy grid.
The details:
Ofgem has approved an initial £28 billion investment for the 2026-2031 period to maintain and upgrade the UK's gas (£17.8bn) and electricity (£10.3bn) networks.
This will directly increase the network charge component of business energy bills, with Ofgem estimating a rise of 5-10% for a typical business by 2031.
The regulator claims the investment is essential for grid stability and will ultimately deliver net savings by reducing reliance on volatile gas prices and cutting grid congestion costs.
For specific business types, indicative annual increases by 2031 range from £1,700 for small offices to £9,760 for a medium factory, before any offsetting savings are applied.
Why it matters: This is a classic 'short-term pain for long-term gain' scenario, but the pain will be felt directly on your business's P&L. 'Network charges' are the non-negotiable costs on your bill that pay for the physical pipes and wires. Ofgem has just approved a significant price hike for this infrastructure, starting in 2026. While the promise is that this investment will eventually lower wholesale prices by making the grid more efficient and better able to handle renewables, the immediate impact for your business is a guaranteed increase in these fixed charges. For any finance director or ops manager budgeting for the next 5 years, this is a new, rising cost line item that needs to be factored in, regardless of what the wholesale energy market does.
What you can do:
Update Your Forecasts: When building medium-term financial plans, factor in a material increase on the network charge component of your electricity bills from April 2026.
Review Your Energy Contract: Check your current contract's terms for 'pass-through charges'. Understand if and how these future network cost increases can be passed directly on to you, even within a 'fixed' term.
Question Your Supplier: Ask your energy supplier or broker how they are modelling these RIIO-3 cost increases in their quotes for contracts that will run beyond April 2026.
DESNZ
Image source: Gemini / Meet George
The Spark: The UK government has extended its main carbon pricing scheme to 2040, cementing a key driver of wholesale energy costs for the long term.
The details:
The UK Emissions Trading Scheme (ETS) cap, originally set to run until 2030, has now been extended to 2040.
The ETS is the UK's 'cap and trade' system, which limits the total greenhouse gas emissions for sectors like power generation, heavy industry, and aviation.
This system creates a 'carbon price' that large emitters must pay, which is a direct component of wholesale electricity costs.
The government's stated aim is to provide long-term market certainty to encourage business investment in decarbonisation.
Why it matters: What's the real-world impact? While this announcement seems targeted at big industrial players, it directly affects every business's P&L. The carbon price set by the ETS is a fundamental ingredient in your wholesale electricity price; when gas power plants run, they pass the cost of their carbon allowances straight through to your bill. By extending the scheme to 2040, the government is confirming that this 'carbon cost' is not a temporary tax but a permanent feature of the UK energy market. For your business, it means the financial case for reducing grid reliance through energy efficiency or on-site generation just got stronger, as it provides a shield against the guaranteed, long-term volatility of carbon pricing.
What you can do:
Ask your current energy supplier or broker to clarify how UK ETS carbon costs are treated in your electricity contract – are they fixed, or are you exposed to price fluctuations?
When your next energy contract is up for renewal, specifically ask for quotes that offer budget certainty by fixing all third-party costs, including environmental charges.
If you've previously dismissed solar panels or other efficiency projects, re-run the numbers. The long-term certainty of carbon costs adding to grid prices may significantly shorten the payback period for these investments.
The Guardian
Image source: Gemini / Meet George
The Spark: One of the UK's largest energy suppliers, Ovo, is facing serious financial uncertainty, raising critical questions about supplier stability and the real-world impact of new regulations on the entire market.
The details:
Ovo Energy has warned of doubts over its financial future after failing to meet Ofgem's new financial resilience standards, which require suppliers to hold significant capital in reserve.
The company is struggling to raise £300m in new investment and is cutting around 200 jobs to reduce costs, following the departure of its CEO and CFO.
Despite its financial struggles, Ovo paid millions in brand royalty fees to a company owned by its founder, Stephen Fitzpatrick, with payable royalties totalling £122m since 2014.
Industry sources suggest Ofgem's new rules, while designed to prevent supplier collapses, may be making the sector unattractive to investors by tying up 'dead capital'.
Why it matters: This isn't just a story about one supplier's bad management; it's a red flag for the entire business energy market. Ofgem's new rules were meant to protect customers by making suppliers more financially robust after the 2021 crisis. The real-world impact, however, is that even major players like Ovo are now under immense financial pressure. For your business, this changes the nature of supplier risk. It's no longer just about small, fly-by-night suppliers collapsing. Now, even the giants are struggling to adapt, which can translate into poor customer service, billing chaos, and a lack of investment in the very systems your business relies on. Ovo's situation is the canary in the coal mine for a market that may be becoming too stable to be competitive.
What you can do:
Assess your supplier's health: Regardless of who your supplier is, use this as a prompt to do a quick health check. Look for recent news reports or announcements about their financial performance or executive changes.
Add stability to your tender criteria: When your next contract is up for renewal, explicitly ask your broker or potential suppliers how they are meeting Ofgem's new capital adequacy requirements. Make financial stability a key factor in your decision, not just price.
Review your 'Supplier of Last Resort' plan: Remind yourself of the process. If your supplier were to fail, what are the steps? Knowing your rights and the Ofgem process provides a crucial safety net.
LATEST MARKET NUMBERS
⚡ The Market Pulse
Wholesale Electricity Price (weekly avg.): 7.68 p/kWh (🔻 -0.70 p/kWh / -8.3%) Based on £76.78/MWh.
Double-dip drop. Prices have fallen sharply for a second week running, now well below the 8p mark.
Wholesale Gas Price: 2.42 p/kWh (🔻 -0.14 p/kWh / -5.3%) Based on 71.00p/therm.
Bearish trend. Gas continues to slide, providing a cheaper baseline for the entire energy complex.
UK Carbon Price (UKA): £56.20 per tonne (🔻 -£1.91 / -3.3%)
Softening. After weeks of stability, the cost of polluting has dropped, removing some upward pressure from electricity rates.
Wind + Solar Generation (Share of UK Mix): 42.8% (🔻 -2.4 pts / -5.3%)
Steady Breeze. A slight dip from last week’s highs (Wind 40.9% + Solar 1.9%), but renewables are still comfortably providing over 40% of our power.
The Meet George Take
The "Input Cost" Slide.
If last week was about the volume of power (wind coming back), this week is about the cost of making it.
The data shows something interesting: renewable generation actually dipped slightly (down 2.4 points), yet electricity prices still plummeted by over 8%. Why? Because the ingredients got cheaper.
When the wind drops, we burn gas to fill the gap. Usually, that spikes the price. But this week, the price of Wholesale Gas dropped by 5.3% and the Carbon tax dropped by 3.3%. This lowered the "floor price" that gas power plants charge. Essentially, the expensive backup generators became less expensive to run.
The Bottom Line: We are currently in a "bearish" (falling price) cycle. The market is relaxed. Gas storage is healthy, the wind is decent (if not record-breaking), and carbon is softening.
For flexible buyers: Enjoy the ride down; 7.68p is a great weekly average for winter.
For fixed buyers: The panic premium has evaporated. If you were holding off during the "Dunkelflaute" spikes of late November, the market has now corrected in your favour.
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