Millions of households could see an annual saving of £39 on their energy bills as part of proposed changes to the Warm Home Discount funding structure. The government is seeking input through a consultation to potentially transfer the funding burden from the standing charge to the unit rate, which could particularly benefit low-income households with lower energy consumption levels. Noted consumer advocate Martin Lewis praised the initiative as a step in the right direction.
The Warm Home Discount scheme, overseen by the government, offers a one-time £150 discount on electricity bills for eligible low-income and vulnerable households during winter. This winter, the scheme has been expanded to cover approximately six million households, up from around 2.7 million previously.
Currently, suppliers recover costs through the standing charge, a fixed fee applied daily regardless of energy usage. Under the proposed changes, these costs would be shifted to the unit rate starting from April. While the majority of households, especially low-income ones with lower energy consumption, are expected to benefit from this transition, higher energy users, such as those charging electric vehicles at home, may face increased costs due to the switch to the unit charge.
Simultaneously, the government is implementing measures to deliver a promised £150 annual saving on average energy bills by ending the Energy Company Obligation and reallocating funding for the Renewables Obligation to general taxation. These steps are anticipated to result in cost reductions, including significant savings for high-use households relying on electric storage heating.
According to the government’s consultation, approximately 16.5 million households, including 2.8 million low-income households, are projected to benefit from the funding shift. However, around 12 million households could experience negative financial impacts from this specific change. When factoring in the Budget measures, households may still see a net benefit of £138 per year.
Moneysavingexpert.com founder Martin Lewis highlighted the importance of reducing standing charges to incentivize lower energy usage and lower overall bills. He emphasized the positive impact of the proposed changes on consumer costs and welcomed the progress towards addressing longstanding concerns about energy pricing structures.