By Joe Stonor

Shares in U.K. energy companies dropped after the government said it would intervene in the country's power market in moves that could limit the prices that power generators charge.

SSE and Centrica stock fell by 7.15% and 6.3%, respectively, in afternoon European trade. The pair were the second- and third-sharpest fallers in the Europe-wide Stoxx 600. German group RWE and Danish offshore wind-farm developer Orsted, which also generate power for the U.K. grid, fell by 3.65% and 2.3%, respectively.

U.K. Treasury chief Rachel Reeves said late Thursday that she would intervene to cut the link between electricity costs and gas prices in the U.K, the Financial Times reported. More details will be set out in the coming days, she said, according to the FT.

U.K. wholesale electricity prices are set by a system that typically results in the costliest source of energy determining the overall price. As a result, even when cheaper renewables are the primary source of electricity, more expensive gas can elevate prices.

Decoupling gas and electricity could therefore weigh on energy companies' earnings, Citi analysts said.

"SSE shares reflect very little of government intervention risk that is starting to materialize," the bank said.

If gas and electricity prices in the country decouple, SSE and RWE could see hits to net income in 2028 of 6% and 5%, respectively, according to Citi's calculations. Centrica and Orsted would suffer falls of 3% and 2%, respectively.

The withdrawal of a tax on fossil fuels announced by the U.K. government on Thursday could also add downward pressure to the companies' earnings. Removal of the carbon price support--which has placed an extra charge on fossil fuel power stations for their carbon emissions since its 2013 introduction--will likely cause carbon prices to fall, lowering the prices that renewable generators can charge over the medium-to-long term, Jefferies analysts wrote in a note to clients.

Write to Joe Stonor at josephmichael.stonor@wsj.com

(END) Dow Jones Newswires

April 17, 2026 08:19 ET (12:19 GMT)

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