EGL01100 - Introduction: background

The Electricity Generator Levy (EGL) is a temporary charge on the exceptional receipts that have arisen to some UK electricity generators following an unprecedented increase in the wholesale price of electricity meaning that UK households and businesses have seen energy bills increase significantly.

This increase is attributable to the global energy crisis, which has been compounded by the Russian invasion of Ukraine on 24 February 2022. 

Parts of the UK electricity generation sector – principally those based on renewable sources - are receiving the benefit of high wholesale prices but are not experiencing the increased cost of fuel and so have exceptional receipts.   

The EGL legislation is contained in Part 5 of the Finance (No. 2) Act 2023 and this guidance largely follows the layout of the sections in the Act.

The EGL applies at a rate of 45% to exceptional receipts of companies that generate electricity in the UK from 1 January 2023 to 31 March 2028. The levy applies to exceptional receipts from generation that is subject to wholesale purchase of electricity arising during that period.

Exceptional generation receipts are those in excess of those that would arise based on a benchmark price that is above that which was typically being achieved in the UK electricity market before the energy crisis. Should wholesale prices return to nearer historical levels, the EGL may effectively cease before its statutory expiry date of 31 March 2028. 

The Levy does not apply to generation from certain projects for which there had been no substantive decision to proceed as at 22 November 2023. The conditions for the exemption for new investments are explained at EGL22500+