Millions of households could see an annual saving of £39 on their energy bills as a result of proposed changes to the Warm Home Discount funding. The government is seeking feedback on a plan to transfer the cost burden from the fixed standing charge to the energy unit rate, a move that would particularly benefit low-energy users, including those in low-income households struggling with heating costs. This consultation period will conclude on January 6.
Consumer advocate Martin Lewis has praised the initiative, stating that it is a step in the right direction. The Warm Home Discount scheme, managed by the government, offers a one-time £150 discount on electricity bills for qualifying low-income and vulnerable households during the winter season. This winter, the scheme has been extended to include approximately 2.7 million more households, bringing the total number of beneficiaries to an estimated six million.
Currently, suppliers recover the scheme’s costs through the standing charge, which is a fixed daily fee applied to all customers regardless of their energy usage. Under the proposed changes, starting next April, these costs would be shifted to the unit rate, the charge per kilowatt for electricity and gas.
While most households, including 60% of low-income ones with low energy consumption, are expected to benefit from this transition, higher energy users, such as households charging electric cars at home, may bear the impact of the switch to the unit charge.
Simultaneously, the government is set to implement a promised £150 yearly saving on average energy bills through measures outlined in the Budget. These measures include ending the Energy Company Obligation and transferring funding for the Renewables Obligation to general taxation. The government projects cost reductions of up to £395 for high-use households relying on electric storage heating.
Moneysavingexpert.com founder Martin Lewis expressed on social media that the proposed changes should lead to a decrease in the standing charge, as well as a reduction in the unit rate, balancing out the additional costs from the shift. He emphasized the importance of removing the standing charge as it discourages lower energy usage and contributes significantly to high bills.
According to the government’s consultation, around 16.5 million households, including 2.8 million low-income households, are expected to benefit from the transition, while 12 million households may experience a negative impact solely due to this measure. When factoring in the Budget measures, households are projected to be £138 better off annually.