Millions of households could see annual savings increase by £39 on their energy bills due to proposed changes in funding for the Warm Home Discount. The government is seeking input through a consultation to transfer the cost burden from the standing charge to the unit rate for energy consumption. This shift is aimed at benefiting low-income households and reducing expenses for those using minimal energy. The consultation period ends on January 6.
Popular consumer advocate Martin Lewis praised the proposed shift, stating it is a step in the right direction. The Warm Home Discount program, overseen by the government, offers a one-time £150 discount on electricity bills for qualifying low-income and vulnerable households during the colder months. The scheme has been extended to reach an estimated total of six million households this winter, an increase of approximately 2.7 million.
Currently, suppliers recover costs through the standing charge, a fixed daily fee applied to all customers irrespective of their energy usage. Under the proposed changes, the cost burden will be transferred to the unit rate, the charge per kilowatt-hour of electricity and gas, starting in April.
The majority of households are expected to benefit from this transition, particularly 60% of low-income households with lower energy consumption. However, higher energy users, including households charging electric cars at home, may face increased costs due to the shift to the unit charge.
Simultaneously, the government’s pledged £150 annual savings on average energy bills will take effect as part of measures announced in the Budget. This includes the elimination of the Energy Company Obligation and the transfer of funding for the Renewables Obligation to general taxation. The government anticipates reductions in costs, with potentially significant savings for high-use households relying on electric storage heating.
Moneysavingexpert.com founder, Mr. Lewis, emphasized the potential benefits of these changes, highlighting that overall, both the standing charge and unit rate should decrease. The shift aims to address concerns about high standing charges that discourage lower energy usage and disproportionately impact certain demographic groups. The government estimates that approximately 16.5 million households, including 2.8 million low-income households, will benefit from the proposed changes.
However, around 12 million households may experience adverse effects from the shift alone. When factoring in the Budget measures, these households could still see an annual saving of £138.