It is difficult to think of a more complex and somewhat chaotic time for business energy, with the shadow of major crises inspiring the development of major reforms.
In this environment, it is best to have a guide in the form of a specialist energy consultancy group that can provide tailored advice, auditing services and analysis to ensure you get the perfect deal for your business at the best possible rates on the market.
Market reforms will always bring with them a sense of reserved, cautious optimism until the ideas coalesce into firm policies that can be analysed and modelled to determine how they will affect your energy bills.
There are several aspects to the Review of Electricity Market Arrangements (REMA) proposals, but perhaps the most interesting of these is a proposal that has been dropped entirely.
Following confirmation by the UK government that zonal energy pricing will not be pursued further, here is a brief guide on what it was, why it was controversial, and whether its replacement will save your business money.
Why Are Reforms Deemed Necessary?
To say that UK energy prices have been somewhat variable would be a significant understatement, as the country’s particular vulnerabilities to the chaos of the global energy wholesale market led to a reckoning for the domestic energy market.
Following the liquidation of a huge number of smaller energy companies, with the biggest of these being Bulb Energy’s special administration, one of the biggest direct culprits according to analysts was the spike in wholesale gas prices caused by a combination of a global health crisis and the war in Ukraine.
The nature of the energy market meant that the cost of energy was based on the most expensive part of the energy mixture. This meant that whilst many of the energy companies that went under specialised in renewable energy, their prices and costs were connected to the gas market.
The prices spiked, that price pushed against the energy price cap and dozens of energy companies went bust overnight until the Energy Price Guarantee set maximum prices with compensation for energy companies. According to later analysis, the price cap could have reached over £4,000 per year.
Whilst much of the analysis and policymaking was focused on residential customers, the impact of those prices will often affect the business energy market both directly and indirectly.
Similarly, reforms to emphasise clean energy for both environmental and market independence reasons have been proposed and debated since the energy crisis started in 2021.
These included not only measures to scale up green energy production, but also to reform a pricing structure to reform or replace the current merit order structure.
What Was Zonal Energy Pricing?
One option for this was to develop a zonal pricing model, where the UK would be divided into regions that paid a different price for electricity based on local generation and demand.
The proposal is not new; it was first suggested in 2022 and ignited a furious debate between energy firms, stakeholders and industry bodies that would last until the plan was officially abandoned on 10th June 2025.
The idea was that businesses in areas of high demand would relocate to areas of high supply and potentially save a lot of money in the process. Several companies, most notably Octopus Energy, were in favour of the idea, primarily because it would stop wind and solar farms from being forced to shut down to avoid overloading local storage stations.
However, the biggest concerns were for people and businesses that could not move and had unwittingly been forced into a postcode lottery where their prices might fall dramatically or increase to such an extent as to force them out of their homes.
As well as this, the system was considered even more confusing and obtuse for both customers and businesses expected to invest in areas of high demand.
There was intense lobbying on both sides of the great debate, with the big conclusion being that it could lead to either huge savings or much higher costs depending on who you asked.
Ultimately, zonal pricing was ruled out, but what will replace it?
How Will Energy Prices Be Reformed?
Instead of zonal pricing, the government has set out proposals to reform the national energy price system so that everyone in the country is part of the same energy market.
Whilst the complete set of proposals is still being developed, the aim is to make the current system more efficient and stable, which allows for greater investment into clean energy and lower energy bills in the long run.
There are several other stages to the pricing plan that need to be developed, most notably the Strategic Spatial Energy Plan, but the hope is to ensure that the price spikes and uncertainty that have dominated the energy market as of late will not continue.
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