You certainly have to be on your toes to keep pace with the Government's fluid approach to energy policy these days. A week ago all the signs were that EDF, of France, would buy British Energy - and so take the lead in the construction of the next generation of nuclear power stations - and that the Government was considering a windfall tax on energy company profits.

Now EDF has been rebuffed and a windfall tax is said to be off the agenda.

To be fair, the setback in the sale of British Energy was outside the Government's control. Two of the company's top shareholders decided that the French offer undervalued the nuclear generator. And all sides remain hopeful that a deal can still be done.

The apparent flipflop on a windfall tax shows the pressure that the Government is under from both sides on the fuel poverty debate. The Government is committed to ending fuel poverty, defined as households where energy bills account for more than 10 per cent of income. Thanks to soaring energy prices, fuel poverty is not ending but increasing.

Labour backbenchers, already in a panic over the Government's dismal poll ratings, are understandably alarmed at the prospect. They see a windfall tax on energy company profits as a popular means to pay for a popular end.

In 1997, Labour got away with a £5.2billion windfall tax on the privatised utilities. Why not try it again? For several reasons, say the opponents. For a start, some officials argue that it would be more vulnerable to a legal challenge this time. Some of the companies also believe that they were given a commitment by Gordon Brown that they would not be hit again. The companies are in talks with the Government about raising funds in other ways, including tweaks to the EU carbon emissions trading scheme.

They have a powerful ally in the form of John Hutton, the Business Secretary, who has shown himself able to stand up to colleagues, including Mr Brown, on behalf of business. Mr Hutton argues that it would hardly encourage investment, just as the industry is poised to spend £30 billion on new power stations. Above all, he will want to rule out a windfall tax that hits the company that has been a prime beneficiary of rising electricity prices - British Energy. That would hardly help efforts to get the French to pay a bit more.

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