Moving away from Ofgem's fixed price cap towards flexible energy pricing, where costs vary by region and time of day, could cut the price of electricity by 4p/kWh by 2040 and save households £200 a year on average, according to research published on 24 June 2025 by the Resolution Foundation1. The report, Flex Appeal, was funded by the European Climate Foundation1.
The £200 total combines two changes. Time-of-use tariffs that reward households for moving electricity use out of peak times could cut bills by an average of £160 per household per year by 2040, the authors estimate. A separate "zonal" pricing system in wholesale markets could reduce system costs by £3.7 billion a year, equivalent to £40 per household1.
The research states that shifting consumption away from peak times through appliances such as dishwashers has only a very small effect on bills today, but that the potential grows as electric vehicles become more common. EVs are expected to account for almost three-quarters of new flexible capacity by 2030, and on a flexible tariff an EV owner could save £120 a year on average by charging overnight compared with the price cap1. The authors warn that EV owners who do not shift their usage will push up peak demand and inflate bills for others, and recommend a usage limit above which the fixed price cap would not apply, moving those households onto variable tariffs1.
For the estimated 590,000 low-income families with high energy use from heating and appliances, the report recommends a new Ofgem-regulated time-of-use tariff with different price caps in peak and off-peak periods1.
"Introducing a regulated 'time-of-use tariff' with different caps for peak and off-peak periods would help smooth out electricity supply and demand and bring overall costs down, while guaranteeing fair prices for high-energy use households."
| Proposed change | Estimated saving |
|---|---|
| Time-of-use tariffs | £160 per household per year by 2040 |
| Zonal wholesale pricing | £40 per household per year |
| Combined | £200 per household per year by 2040 |
| EV charging overnight on a flexible tariff | £120 per year on average |
Why it matters for households
The proposals would change how a home's electricity is priced, not just how much it costs. Under time-of-use pricing, the value of shifting load, such as running a washing machine or charging a car overnight, depends on being on a tariff that reflects those periods, which in turn depends on having a smart meter capable of half-hourly readings. The report's own figures suggest the sums available from appliances alone are small today, with the larger gains tied to EV charging and to wholesale reform that households would not control directly.
The research also sets out a trade-off for energy independence at home. Flexible pricing gives households more scope to respond to wholesale conditions, but it transfers price risk onto them, which is why the authors propose regulated caps for peak and off-peak periods and protections for the 590,000 low-income families identified as having unavoidable, inflexible electricity needs1. The report does not set out how a zonal system would divide regions, and no regional rates have been published1.
What happens next
The report recommends that the Government set a usage limit above which the fixed price cap would not apply, and that Ofgem introduce a regulated time-of-use tariff with separate peak and off-peak caps1. No timetable for either measure has been reported1.