Millions of households stand to benefit from an additional £39 yearly saving on their energy bills as part of proposed changes to the Warm Home Discount funding structure. The government is seeking feedback on shifting the cost burden from the fixed standing charge to the variable unit rate, a move that would particularly assist low-income families and those with lower energy usage. Consumer advocate Martin Lewis praised the initiative, calling it a step in the right direction.
The Warm Home Discount program, managed by the government, offers a £150 discount on electricity bills to qualifying low-income and vulnerable households during the colder months. This winter, the scheme has been extended to reach approximately six million households, an increase of 2.7 million. Currently, suppliers recover costs through the standing charge, a daily fixed fee applied regardless of energy consumption. Under the proposed adjustment, the expense would shift to the unit rate, the charge per kilowatt for electricity and gas, starting in April.
Most households, including 60% of low-income ones with lower energy usage, are expected to benefit from this change. However, higher energy consumers, such as households charging electric vehicles at home, may face increased costs due to the shift to the unit charge. Concurrently, the government’s planned £150 annual savings on average energy bills will be implemented through measures outlined in the Budget, which includes ending the Energy Company Obligation and reallocating funding for the Renewables Obligation to general taxation. This combined approach aims to reduce expenses, potentially saving high-use households up to £395, particularly those relying on electric storage heating.
In response to the proposal, Moneysavingexpert.com founder Mr. Lewis emphasized the importance of reducing standing charges, which he views as a disincentive for lower energy usage and a significant source of consumer complaints. While acknowledging the positive direction of the change, he highlighted the need to address the financial burden faced by individuals who use minimal energy yet bear high standing charges. The government’s consultation indicates that around 16.5 million households, including 2.8 million low-income ones, could benefit from the transition, albeit with 12 million households potentially experiencing negative impacts. When factoring in the Budget measures, households are projected to be £138 better off annually.
