(Bloomberg) --

A new windfall tax on “excess” profits of electricity generators is set to help the British government pay for an extension to limits on high household energy bills.

Renewable, nuclear and biomass generators will see a 45% tax, while an existing levy on oil and gas firms will rise to 35% from 25% as the government seeks to claw back cash from companies profiting from higher prices, according to the Autumn Statement laid out by Chancellor of the Exchequer Jeremy Hunt.

Energy rates for households will be capped at a higher level from April, pushing up the typical bill by 20% to £3,000 ($3,537.9). That means the normal summer bill will rise from £670 to £1,015, according to consultancy BFY Group.

Surging energy prices are stoking inflation that could leave millions in debt and unable to pay their bills this winter. Help for households from April is less generous than promises made by former Prime Minister Liz Truss, but does include plans to reduce energy demand with additional funding for insulation programs. Hunt said his package will fill an estimated £55 billion hole in the public finances. 

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The 45% levy will apply to clean power that’s sold above £75 per megawatt-hour. The tax will run until the end of March 2028 and excludes generators with fixed revenues already under the contracts-for-difference regime as well as small generators.

Renewable developers had warned that investment will be at risk if any windfall tax is too severe. Growth of offshore wind is critical to Britain being able to cut its dependence on imported gas for producing power and will also help reach goals to slash carbon emissions. 

Shares in power generators climbed, with Drax Group Plc up as much as 8% and Centrica Plc rising as much as 6% as the news provided more clarity on future profitability.

Hunt promised further measures on energy efficiency, including £6 billion of funding between 2025 to 2028. A task-force will aim to reduce consumption from buildings and industry by 15% by 2030, compared to a 2021 baseline.

“There’s only one way to stop ourselves from being at the mercy of international gas prices -- energy independence combined with energy efficiency,” Hunt said.

The government will start a campaign to encourage homes, businesses and public sector organizations to cut energy use. Truss had previously blocked a similar proposal from going ahead. 

Insulation campaigners said the package didn’t go far enough. The Chancellor paid “lip service to home insulation”, said Greenpeace UK political campaigner Ami McCarthy. “A promise of more money in three years’ time helps no one.”

The announcement that nuclear power will also be subject to a windfall tax comes as the government confirmed its support for Electricite de France SA’s Sizewell C project. The 3.2-gigawatt facility had been reported as being under review ahead of the statement.

As things stand the government will fund £700 million or 50% of the development costs alongside EDF. Once the project reaches financial close both sides will hold a 20% stake with private investors making up the rest, Julia Pyke, head of finance for Sizewell C, told a panel on lawmakers on Wednesday.

--With assistance from Olivia Fletcher.

(Updates with details and comment throughout.)

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