Millions of households are expected to see an additional yearly savings of £39 on their energy bills as part of proposed changes to the Warm Home Discount funding. The government is seeking feedback through a consultation to transition the funding burden from the standing charge to the unit rate, particularly benefiting low-income households with minimal energy consumption struggles. Consumer advocate Martin Lewis has praised the initiative, stating it is a positive step forward.
The Warm Home Discount scheme, managed by the government, offers a £150 discount on electricity bills to qualifying low-income and vulnerable households during winter. This winter, the scheme has been extended to approximately six million households, up from 2.7 million. Suppliers currently recover costs through the standing charge, a fixed daily fee for all customers, regardless of energy usage. The proposal aims to shift this cost to the unit rate, the charge per kilowatt for electricity and gas, starting in April.
The majority of households, including 60% of low-income ones with lower energy consumption, are expected to benefit from the change. However, higher energy users, such as households charging electric vehicles at home, may be adversely affected by the shift to the unit charge. Concurrently, the government’s promised £150 annual savings on average energy bills will be implemented, following measures announced in the Budget to end the Energy Company Obligation and transfer funding for the Renewables Obligation to general taxation. These changes are anticipated to reduce costs, particularly benefiting high-use households reliant on electric storage heating.
Moneysavingexpert.com founder Martin Lewis highlighted on social media that the proposed shift should lead to a decrease in the standing charge, as well as a reduction in the unit rate, resulting in overall lower energy bills. The government estimates that around 16.5 million households, including 2.8 million low-income households, will benefit from the transition, while 12 million households may experience negative impacts from this single measure. However, factoring in the Budget measures, households are projected to be £138 better off annually.