The government published a summary of responses to the first consultation of its review of electricity market arrangements, known as REMA, in March 2023, deciding to rule out a number of options including "pay-as-bid"1. The review had been launched by the then-Conservative government in April 2022, with the first consultation running in July that year1.
A second consultation followed in March 2024, with results published alongside the REMA autumn update in December 20241. That stage narrowed the options further, ruling out both the "green power pool" and split market options, each of which would have created a separate market for renewables1.
The review sits within a wider context of high household electricity costs. Under the latest price cap from Ofgem, the average household faces an electricity bill of £926 per year, up from £603 before the energy crisis, a rise of 54%1. Two-fifths of the current cap is made up of wholesale costs (38%), one-fifth from network charges (22%), plus another one-fifth from green levies (15%) and social policies (4%); the final fifth covers operating costs (14%), profits (2%) and other items1.
Gas sets the wholesale price of electricity in the UK 98% of the time, according to academic research published in 2023, far more often than in France (7%) or Germany (24%), even though gas accounts for only a third of generation overall1. As of May 2025, gas prices remained three times higher than before the global energy crisis1.
"A summary of the responses to this consultation was published in March 2023, with the government deciding to rule out a number of options, including 'pay-as-bid'"
Why it matters for households
The REMA process determines how the wholesale electricity market is structured, and wholesale costs make up the largest single share of a household electricity bill at 38%1. Decisions taken in the review therefore bear on the mechanism that sets the price paid for each unit of electricity a home consumes.
The UK market uses marginal pricing, under which all generators running in each half-hour period are paid the same price, set by the final unit needed to meet demand1. Because gas is almost always that marginal unit, wholesale electricity prices in the UK track wholesale gas prices closely, even though gas provides only about a third of generation1. Options that would have separated renewables into their own market, which the government ruled out in December 2024, were aimed at this link1.
For a household, the practical consequence is that the cost of electricity remains tied to gas prices rather than to the cost of the cheapest generating source. The government has not reported a decision on zonal power pricing, which would set different prices in different parts of the country; it is expected ahead of the seventh Contracts for Difference allocation round in summer 20251.
What happens next
The government is expected to decide whether to switch to zonal power pricing ahead of the seventh CfD allocation round in summer 20251. An industrial strategy is set to be published in June1. The UK and EU have signed a new energy cooperation deal1.