One of the biggest electricity generators in Britain has warned that it will reconsider its £15billion investment plans if the Chancellor were to impose a fresh tax on the sector.
German energy giant RWE also denied that it was making windfall profits and argued that a new levy would actually push up energy bills.
Rishi Sunak has already imposed a highly-controversial windfall tax on North Sea oil and gas producers to fund help for families facing record energy bills.
He has threatened to extend the cash raid to power-plant owners, declaring last month that "certain parts of the electricity-generation sector are also making extraordinary profits".
However, it was reported last week that the Government has now signalled it is cooling on proposals to widen the new levy to include electricity generators.
A source said: "The direction of travel is away from a windfall tax on generators because the sector is just too complex and it could clobber investment...it turns out it's just too complex to work out who has made how much excess profit."
This comment has puzzled and annoyed the North Sea oil and gas industry, which feels it is being unfairly targeted by the Government while other sectors escape.
Undermining major investments
Just last week industry body Offshore Energies UK warned that the cash raid by the Government, which could total £17.5billion between now and 2025, may already be undermining the major investments needed to keep the country's lights on.
Just the possibility of being hit by an extra tax has still unsettled electricity generators. Like oil and gas producers, they argue that such a move would deter investment. However, the argument from the North Sea sector has fallen on deaf ears at Westminster.
RWE is the second-biggest electricity generator in Britain, with more than 9GW of power plants including about 7GW of gas-fired generation, 1.3GW of offshore wind and 600 MW of onshore wind. It has said it plans to invest £15billion in Britain over the next eight years, including in more wind farms and decarbonising its gas plants.
Markus Krebber, RWE chief executive, said: "If things change, we reconsider. If the environment changes - and part of that is of course the regulatory framework and political decisions - everybody would reconsider."
Tom Glover, RWE's UK boss, told the Times: "As RWE and the industry, we are extremely concerned about a short-term intervention. It's a global market and we need to make the UK attractive. The UK currently is one of the more attractive places to invest because they haven't done windfall taxes."
He said a levy would ultimately push up bills.
"If you start doing things like windfall taxes, then the investor view will be negative, which will increase the cost of capital, which overall will mean all projects will become more expensive, which means the customer ultimately ends up paying more longer term. A windfall tax is a short-term fix but results in a longer-term cost."
Heightened tensions
The comments come amid heightened tensions between RWE and the Government. It was revealed on Saturday that Business Secretary Kwasi Kwarteng had summoned Mr Glover for a meeting over the company's "exploitation of British bill payers" after it used a contract loophole to cash in on soaring power prices.
The company delayed activating a contract to supply electricity from the third phase of its Triton Knoll wind farm at about half current market prices, which Mr Glover admitted enabled it to "make more money in the market". He insisted it was "not a loophole", but "a contractual right".