Millions of households could see an additional annual savings of £39 on their energy bills as part of a proposal to restructure the funding for the Warm Home Discount scheme. Under the plan, the cost burden would shift from the fixed standing charge to the variable unit rate, benefiting low-income households and those with lower energy consumption. The government has initiated a consultation on this matter, which will conclude on January 6.
Renowned consumer advocate Martin Lewis has praised the initiative, stating it is a step in the right direction. The Warm Home Discount scheme, managed by the government, offers a £150 one-time discount on electricity bills to qualifying low-income and vulnerable households during the winter season. This winter, the scheme has been extended to reach an estimated total of six million households, a significant increase from previous years.
Currently, suppliers recover the costs of the scheme through the standing charge, a fixed daily fee applied to all customers irrespective of their energy usage. The proposed change would transfer this cost to the unit rate, the charge per kilowatt for electricity and gas, starting from April next year.
The transition is expected to benefit the majority of households, particularly around 60% of low-income households with lower energy consumption. However, higher energy users, including households that charge electric vehicles at home, might experience a financial impact 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. This includes ending the Energy Company Obligation and shifting funding for the Renewables Obligation to general taxation. The government anticipates savings of up to £395 for high-use households relying on electric storage heating.
In a social media post, Moneysavingexpert.com founder Martin Lewis explained that the proposed changes should lead to a reduction in standing charges and unit rates, ultimately resulting in lower bills for consumers. He highlighted the current standing charge as a significant issue that discourages lower energy usage and disproportionately affects certain demographics.
The government’s consultation indicates that approximately 16.5 million households, including 2.8 million low-income households, will benefit from the funding shift. However, around 12 million households may experience a negative impact from this specific measure alone. When factoring in the Budget measures, households are still projected to be £138 better off annually.