Claw back excess profits on the grid to subsidise energy bills, says IPPR

• Introduce mechanism on network companies to rebate £183 to households, says think tank 

• IPPR also calls for “free electricity hours” to take advantage of windy days 

Households could receive a £183 rebate on their energy bills if the government acts to claw back excess profits made by energy network companies, according to new research by the Institute for Public Policy Research (IPPR). 

Energy network companies, which are responsible for building and maintaining the electricity grid, are expected to make around £5 billion in excess profits between 2021 and 2026. These profits sit well above the returns originally judged necessary to deliver investment. 

At the same time, the network costs component of household energy bills – the part that directly contributes to grid maintenance and buildout – has already risen sharply, increasing by £129 since 2022, with a further £108 rise projected between 2026 and 2032. 

While major investment in the electricity grid is essential for delivering a clean and secure power system, IPPR warns that this transition cannot come at the expense of households.  

Under the current regulatory framework, consumers are paying more while network companies continue to retain windfall gains IPPR warns that more work is needed to minimise the impact on households. This starts with making sure that network companies do not make windfalls under the current and future regulatory regime. 

The report finds that the current system does not consistently incentivise network companies to deliver value for money for consumers. It also highlights that cheaper ways of managing energy  such as shifting consumption to times when renewable electricity is abundant - are not being used enough. This shift would make the most of sunny and windy days and reduce the influence of expensive gas. 

To address this, IPPR recommends introducing a regulatory clawback mechanism to return excess network profits directly to households. The £183 rebate would be delivered as a rebate from network companies onto household energy bills share across households.  

Alongside this, IPPR calls for the introduction of “free clean electricity hours”, giving households access to zero‑cost electricity during periods of surplus renewable generation. Available to all households with a smart meter, the policy would provide an immediate, visible link between clean power and lower bills. 

Modelling by the think tank suggests households could save around £13 in 2026 and £18 in 2027 through free electricity hours, as periods of surplus renewable power become more frequent.  

While initial savings are modest, IPPR says the policy is designed to ensure everyone can benefit from flexibility, not just households able to invest in electric vehicles or home batteries, and to unlock much larger system‑wide savings over time. 

Together, the proposals offer a clear opportunity for government to demonstrate it is putting the cost of living at the heart of energy policy: investing in vital infrastructure while ensuring consumers see fair and tangible benefits. 

IPPR recommendations include: 

• Claw back excess profits from network companies, delivering a £183 rebate to households and ensuring future windfalls are returned automatically  

• Introduce free clean electricity hours, giving households access to cheaper electricity when renewable generation is high  

• Shift more savings from network companies to households when projects come in under budget, so billpayers see more of the benefit 

Joshua Emden, senior research fellow at IPPR, said: 

“Households are already under pressure from high energy bills, which are set to rise once again, yet billions in excess profits are being retained by network companies. That cannot be right. 

“The government has the power to step in to make sure people get a fair deal from upgrades to the network. Clawing back excess profits and returning them to households is a key step in keeping energy bills down.” 

Tazu Walden, researcher at IPPR, said: 

“Upgrading the electricity grid is essential for a clean and secure energy system, but the way we do it matters. Right now, the system isn't consistently delivering value for money for consumers, and cheaper ways of running the grid are being overlooked. 

“With the right reforms, we can build the infrastructure we need while making sure households see the benefits in lower bills.” 

ENDS 

NOTES TO EDITORS  

Estimations on network company profits are extrapolated from analysis by Citizens Advice. The £129 historic and £108 projected rises in network costs are drawn from Ofgem data cited in the report, and the £13 (2026) and £18 (2027) household savings estimates are based on illustrative IPPR modelling.