Millions of households stand to save an additional £39 annually on their energy bills as part of a proposed change in funding for the Warm Home Discount scheme. The government is seeking feedback on a plan to shift the cost burden from the fixed standing charge to the variable unit rate, which would particularly benefit low-income families and those with lower energy consumption. The consultation period for this initiative is scheduled to conclude on January 6.
Renowned consumer advocate Martin Lewis has praised the proposal, stating 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 to qualifying low-income and vulnerable households during winter. This winter, the scheme has been extended to approximately 6 million households, an increase of around 2.7 million from the previous year.
Currently, suppliers recover the scheme costs through the standing charge, a fixed daily fee applied to all customers regardless of usage. The proposed shift to the unit rate, the charge per kilowatt for electricity and gas, is expected to benefit most households, especially around 60% of low-income households with lower energy consumption. However, high-energy users, including households that charge electric cars at home, may face increased costs due to the transition.
Simultaneously, the government aims to implement a £150 annual savings on average energy bills by redirecting funding from the Energy Company Obligation and Renewables Obligation to general taxation. This move is projected to result in cost reductions of up to £395 for households relying on electric storage heating.
In a social media post, Moneysavingexpert.com founder Martin Lewis highlighted the potential for standing charges to decrease with the proposed shift, ultimately leading to lower overall energy costs for consumers. The government estimates that approximately 16.5 million households, including 2.8 million low-income households, would benefit from the change, while 12 million households may experience negative impacts. When factoring in the Budget measures, the affected households are predicted to still save £138 annually.