Some of Britain's biggest electricity generators are today reported to be more in favour of being hit by a windfall tax than being pushed into signing cut-price power-supply contracts this winter.
The Times says the idea of a one-off levy is gaining popularity amid fears that other proposals for tackling excess profits may be too complex to implement at short notice and could be even more damaging financially.
Rising gas prices have inflated wholesale electricity prices, pushing up energy bills and resulting in huge profits for many generators.
Prime Minister Liz Truss has pledged that the Government will subsidise a freeze on energy bills for households and firms, with details of the business-support package expected on Wednesday.
It is due to be unveiled by Business Secretary Jacob Rees-Mogg.
The Telegraph says the business-support plan was being finalised at the weekend in talks involving Number 10, the Treasury and the Business Department.
There has been speculation that helping UK firms and households with their energy bills could cost an astronomical sum - up to £200billion.
Long-term contracts sought
Ms Truss wants to reduce wholesale power costs by getting generators to sign long-term contracts to supply electricity below high market rates.
Ministers are understood to have held talks with companies including Orsted, RWE, SSE, ScottishPower, Drax, Vattenfall and EDF.
People familiar with the discussions say some executives have been alarmed by ministers pushing to introduce such contracts before winter - and they fear this could inflict huge losses on those that have already hedged some of their power output for coming months below market prices.
Senior executives at several power-generation groups, speaking on condition of anonymity, told the Times that, while they did not want a windfall tax, they now believed it may be the best option for this winter, since it would only target actual profits.
One said they would back a windfall tax if it was "implemented in a fair way and doesn't stifle investment - so you get allowances if you're going to continue to invest".
Another senior executive said: "I don't think anybody thinks that anything other than a windfall tax is the best way forward."
It marks an extraordinary change of tune after a furious industry backlash when a windfall tax was first mooted by Rishi Sunak in May. The former chancellor considered including power-generation companies in his "energy profits levy" on North Sea oil and gas producers, which increased the tax rate but also offered tax breaks for investment.
'Nice' reinvestment clause
A power-generation source said: "Some of the generators have been saying: 'Why don't we just do a windfall tax? It's going to be time-limited, there's going to be a nice reinvestment clause as per the oil and gas one.' I think that would probably be the preference."
The proposed long-term contracts assume generators sell their power in the market, and then pay back the difference between the market price and the agreed price to consumers.
Hedging is a financial strategy used to limit risks and some companies have already hedged much of their expected output at prices well below market rates. If they are now forced into new government contracts, they would have to buy back their hedged positions, incurring huge losses.
Tom Glover, UK boss of RWE, said: "It's important that the government take into account those generators that have hedged forward. If generators were forced to unwind their existing hedges, that could have significant negative financial consequences."
A government source said that "generators' hedging arrangements will be considered when exploring options".
The Telegraph also says today that Chancellor Kwasi Kwarteng is expected to announce in his mini-Budget on Friday that Ms Truss's planned National Insurance cut will take effect in workers' November payslips.