Here we go again… gas and oil markets have been extremely volatile this month following the start of the conflict in Iran and the wider Middle East. Weather conditions are mild, and global LNG supply continues to grow. However, the current closure of the Strait of Hormuz, together with attacks on energy infrastructure in the region, has raised concerns about a potentially severe supply disruption. Volatility is likely to remain elevated in the coming days and weeks. The key questions for the market are how quickly the Strait of Hormuz can reopen and whether Qatari production facilities will suffer significant damage. A prolonged disruption to exports from the Persian Gulf (lasting several months or more) would likely trigger another energy crisis. Conversely, a resumption of LNG exports within a few weeks would likely push gas and power prices back to (or even below) last month’s levels, given the currently weak fundamentals.
Short-term power prices have remained subdued, supported by strong renewable output and robust nuclear generation in France. However, market focus remains firmly on the Middle East conflict, where a stream of often contradictory headlines continues to drive elevated volatility.
The outlook remains highly uncertain. Upside risks persist as long as the Strait of Hormuz remains closed, alongside the potential for further damage to Qatari LNG infrastructure. Conversely, any de-escalation and/or a partial reopening of the Strait would likely trigger a sharp downside correction in prices. We really are playing a waiting game, but it is important to remember not to be panicked or pushed into agreeing a contract early if you do not need to but rather continue to monitor the markets and seek professional advice from your supplier or broker. You do not want to tie your business into a long-term contract at an excessively higher price than needed!
UK electricity costs are increasingly shaped by structural, policy-driven charges embedded directly into consumption. Confirmed increases to the Climate Change Levy (CCL) and updated forecasts for the Nuclear Regulated Asset Base (RAB) Interim Levy Rate (ILR) reinforce a broader trend: non-commodity costs are becoming a material and growing component of business energy spend. The Government has already confirmed two staged CCL increases:
- From 1 April 2026: ~0.801p per kWh
- From 1 April 2027: ~0.827p per kWh
CCL is entirely consumption-based. It scales directly with electricity and gas usage and is passed through within contract structures. There is no mechanism to hedge it and no negotiation over its application. Organisations eligible for Climate Change Agreements (CCAs) such as laundries, should ensure relief mechanisms are fully optimised. For others, the only meaningful lever is demand reduction. Introduced in November 2025, the Nuclear RAB Levy represents a fundamental shift in infrastructure financing. Rather than investors carrying construction risk alone, electricity consumers now contribute to funding new nuclear capacity as announced by the Government, beginning with Sizewell C during the build phase. The levy is set quarterly via the Interim Levy Rate (ILR) by the Low Carbon Contracts Company. We have already received confirmed ILR rates for the below periods:
- Nov–Dec 2025: ~£3.455 per MWh
(Approximately 0.34-0.35p per kWh)
- Jan–Mar 2026: ~£3.663 per MWh
(Approximately 0.35–0.37p per kWh)
The Combined Effect for a business consuming 1,000,000 kWh annually in 2026–27, indicative exposure could sit in the region of:
- CCL: ~£8,000
- RAB (forecast ILR range): £3,500–£4,500
- Combined levy exposure: ~£11,500–£12,500 per year
This sits alongside wholesale pricing increases, network charges (DUoS/TNUoS), capacity market costs and other environmental obligations. With all of these new and increased tariffs, businesses need to budget accordingly, especially as these are in effect new Government and industry tariffs, they can be passed on to customers in both flexible and fixed energy contracts!
