UK Budget 2026: Data Centre Covenant, Generator Levy Extension, CfD Consultation

Per Vinson & Elkins' 28 October 2026 client alert, the UK Budget contains a dense package for the power sector beneath its headline consumer measures (£2.6bn Household Energy Payment; VAT cut on electricity extended to July 2027). For data centre developers, generators and their investors, the material items are a new Data Centre Covenant requiring "strategic" projects to meet five tests (lower bills, local community investment, environmental standards, jobs, security) in exchange for accelerated connections under Planning and Infrastructure Act powers, a new Ministerial Control Centre, and — only exceptionally — temporary on-site generation. The Electricity Generator Levy, already raised from 45% to 55% on 1 July 2026, is extended beyond 31 March 2028 for the lifetime of the longest wholesale CfD, though new-investment and CfD exemptions remain; its future design consults in 2027. Carbon Price Support is removed from April 2028, a wholesale CfD consultation is open, and onshore transmission competition is promised "shortly". For sponsors, HMRC's Advance Tax Certainty Service threshold falls from £1bn to £300m on 4 November 2026. Watch the definition of "strategic", the Fingleton nuclear regulatory reset, and the 2027 spending review Cost Control Framework.