Government shelves zonal energy pricing, but with experts divided and reforms still underway, the debate over how to fairly charge for power is far from over
Zonal pricing could still be on the cards for UK households, despite Government's rejection(Image credit: Getty Images)
The government may have shelved plans for zonal electricity pricing, which would have seen power costs vary by region, but energy experts and analysts suggest the conversation is far from over.
While ministers say a reformed national pricing system is the best path forward, some within the energy sector are signaling that regional pricing could still play a role in future market reforms.
With pressure to ease energy prices rises and accelerate clean energy investment, the idea of charging different rates based on where power is generated and used may yet resurface.
A strategic pause, not a full rejection
Ed Miliband said the adoption of a single national wholesale electricity price was a "fairer" system for the whole of the UK(Image credit: Getty Images)
Officially, the UK government has decided to stick with a national electricity price. The Department for Energy Security and Net Zero said the move would help deliver a system that is “fair, affordable, and secure,” and provide clarity for consumers and investors.
But regulators and grid planners haven’t ruled out regional variations altogether. The Strategic Spatial Energy Plan, due in 2026, will outline how future energy projects are distributed, and could set the stage for location-based reforms.
A spokesperson for Ofgem said the regulator welcomed the government’s decision but emphasised it would continue exploring “network charging reforms” to improve system efficiency.
Jonathan Brearley, Ofgem’s chief executive, had previously spoken in favour of zonal pricing. “We’ll be setting out our thinking on network charging shortly,” Ofgem said after the announcement, suggesting location-based pricing could still be revisited.
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What would zonal pricing mean for households?
Octopus Energy claim research showed "zonal pricing will cut costs" for UK households(Image credit: Getty Images)
A key concern raised during consultation was the potential impact on household energy bills.
Critics warned that consumers in the southeast could face higher prices under a zonal model, while those closer to energy generation, particularly in Scotland, might pay less.
The government said the risk of regional inequality, as well as investment uncertainty, was a major reason for abandoning the proposal.
However, new analysis commissioned by Octopus Energy challenges that view. A report from FTI Consulting found that zonal pricing could reduce costs for the industry sector without increasing bills for households. According to the report, a more efficient pricing structure would lead to fewer costly interventions on the grid, savings that benefit all users.
Greg Jackson, CEO of Octopus, said: “We’ve now got clear evidence that zonal pricing will cut costs at the source, without pushing the burden onto households.”
While others in the sector, including firms like SSE and ScottishPower, remained opposed to the zonal model, the data around household impacts remains contested.
Businesses split over cost and complexity
The energy industry remains divided over whether zonal pricing is the best solution to modernise the market.
Some argue it would make the system more efficient by aligning prices with grid constraints and local demand, encouraging smarter investment and grid usage.
The Octopus-backed report outlines how industrial users, from chemical plants to data centres, could save millions annually. Supporters say this would ease pressure on the entire energy system, possibly leading to more stable pricing over time.
But opponents, including major generators and some renewable firms, worry zonal pricing could deter investment and introduce regional uncertainty. Chris O’Shea, CEO of Centrica, called the concept “theoretical” and said its benefits “never stacked up against the real-world risks.”
RenewableUK welcomed the government’s decision, saying it provides clarity and supports investor confidence. “Prices set in the government’s auctions for clean power contracts will be lower than they would have been under the costly zonal pricing regime,” said Ana Musat, the group’s policy director.
Could zonal pricing come back in another form?
While zonal pricing as a standalone policy is off the table for now, experts say its underlying logic, using prices to better reflect location-specific realities, could return through other reforms.
Upcoming consultations from NESO and Ofgem on transmission charges and grid access may incorporate elements of zonal logic without formally adopting the name.
For households, the bigger question may be whether any future reform, zonal or otherwise, addresses the underlying drivers of high costs. Constraint payments, inefficient grid design, and volatile fossil fuel prices all play a role in shaping bills.
As the energy system evolves, the balance between affordability, investment certainty, and decarbonisation will likely continue to fuel debate.
News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals. Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.
