Will UK energy measures lower power prices? Citi analysts weighs in

Citi Research called the UK government’s April 21 energy package a “missed opportunity,” saying measures are unlikely to lower power prices or break the link between gas and electricity. While the Electricity Generator Levy (EGL) rate rises from 45% to 55% (effective July 1), the unchanged £75/MWh threshold means the tax hike is unlikely to materially affect power pricing. Voluntary wholesale CfDs lack detail and, combined with the unchanged threshold and current forward prices, are expected to see limited take-up, leaving power-gas price linkage largely intact. Citi said the measures mainly transfer value to the Treasury rather than consumers and reduce prospects for broader economic benefits from delinking. On equities, Citi kept a Sell on SSE (TP 2,036p) and a Buy on Centrica (TP 218p), noting partial stock recoveries after the announcement. The note could weigh on UK power-related assets and reduce immediate hopes for lower household and industrial electricity costs.