Why electricity costs more than gas, and what could change

26 October 2026

Why does a unit of electricity cost over three times as much as a unit of gas? It is one of the questions we hear most at our drop-ins, and it matters for anyone thinking about a heat pump or an electric car. This week, a group of MPs set out a plan that could start to close that gap.

What the MPs have recommended

On 21 October 2026, the House of Commons Energy Security and Net Zero Committee published its latest report on the cost of energy (UK Parliament). Its headline recommendation is that the government should move all remaining energy transition policy costs off the price of electricity and onto the price of gas, with special support for the gas customers least able to make the switch. It also says future policy costs should not be added to bills at all.

The committee also wants clearer, broken-down bills and faster work to stop the price of gas setting the price of electricity. This is a recommendation, not a decision. The government will reply in the coming months, and Wednesday's Budget (28 October) may also touch on bills.

How does the price of electricity actually get set?

In the wholesale market, the price at any moment is set by the last power station needed to meet demand. Wind and solar are cheap to run, but on most days some gas power stations are still needed, and their costs set the price for everyone. So when gas prices rise, as they have this year, electricity follows, even when much of our power comes from the wind and sun.

On top of that, your electricity bill carries "policy costs", which pay for things like support for renewable generation and help for low-income households. Most of these sit on electricity rather than gas, widening the gap.

What the gap means for heating your home

Here is a simple illustration using today's prices. It is our own arithmetic, it leaves out standing charges, and your home will differ:

• Gas boiler: the price cap for gas is 7.97 pence per kilowatt-hour. At 90 percent efficiency, each unit of heat costs about 9 pence.
• Heating oil: the UK average on 17 October was 118.39 pence a litre including VAT (BoilerJuice). A litre holds about 10 kilowatt-hours, so with a 90 percent efficient boiler each unit of heat costs about 13 pence.
• Air Source Heat Pump: electricity is capped at 26.32 pence per kilowatt-hour. A typical UK system turns one unit of electricity into almost four units of heat (Seasonal Coefficient of Performance of 3.87, Open Energy Monitor), so each unit of heat costs about 7 pence. A less efficient system, at around 3, costs about 9 pence.

So a well set-up heat pump already beats oil comfortably, and edges ahead of gas. If policy costs moved off electricity, that lead would grow.

The pros and cons

Pros:

• Cheaper electricity would make heat pumps and electric cars cheaper to run for everyone, not just those on special tariffs.
• Homes with solar panels would see each unit they use themselves become even more valuable.
• The committee argues the current split is unfair, because electricity is used by every household, including those on the lowest incomes.

Cons:

• Gas bills would rise, and not everyone can switch quickly, which is why the committee calls for targeted support.
• It does not lower the total cost; it moves it. The overall saving depends on how many homes move to electric heating.
• Nothing changes until the government decides, and that could take a while.

What this means for Forest Row

Many homes around Forest Row are off the gas grid and heat with oil. Heating oil bills would not be directly affected, because these policy costs sit on electricity and gas. But oil homes are where a heat pump already makes the strongest case, and cheaper electricity would strengthen it. If you are on mains gas, it is worth understanding your options now rather than when your boiler fails.

Your next step. The best place to start is with your home itself. Check your Energy Performance Certificate on gov.uk to see what it recommends, and look at insulation and draught-proofing first, because a warmer home needs a smaller, cheaper heat pump. Then:

• See which grants are open, including the £7,500 Boiler Upgrade Scheme grant (£9,000 for oil and LPG homes until March 2027), on our grants page.
• Find a certified installer on our audited suppliers and installers list.
• Already have a quote, or a bill you would like checked? Send it to our quotes and bills review for clear, free feedback.

Or come and talk it through at our next drop-in, Saturday 21 November at the Rose Room, Forest Row Community Centre.

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