Britain’s power industry is almost certainly heading for a cap on profits according to US bank Citigroup.
Leaked reports at the weekend suggested that the government was planning to implement new legislation curbing how much renewable generators can charge for electricity.
Concern has risen recently about the link between renewable energy prices and gas prices, which have soared in recent months.
UK energy industry profits are set to hit to reach £170bn over the next two years, according to Bloomberg, due to the soaring price of gas.
Europe has already moved to break the link between renewable and gas-generated electricity.
Citi said the cap mentioned in the articles over the weekend is in effect a windfall tax with the pressure to reduce household energy costs increasing after the Budget.
This follows the collapse of talks between the government and industry on a voluntary scheme to swap ROCs (renewable certificates) for CFDs.
Citi notes the FT article says that the starting point for the cap is c.£50-60/MWh compared to a market price Friday of £490/MWh.
The bank suggests the cap might be introduced as early as this week, adding it had highlighted previously mounting pressure to deliver value-for-money supply-side reform.
This had "increased the chance of a tougher/lower power price and the risk of a windfall tax U-turn, " it said.
Shares in Drax Group (LSE:DRX) today fell 5.6% to 528p, SSE PLC (LSE:SSE) fell 0.5% to 1,492p while British Gas owner Centrica PLC (LSE:CNA) was down 2.8% at 68p.