Millions of households could see an annual saving of £39 on their energy bills as a result of proposed changes to the funding structure of the Warm Home Discount. The government is seeking feedback on a plan to transfer the cost burden from the fixed standing charge to the variable unit rate, which would particularly benefit low-energy users, including low-income families struggling with heating costs. The consultation period for this proposal runs until January 6.
Renowned consumer advocate Martin Lewis praised the initiative, stating it is a step in the right direction. The Warm Home Discount program, managed by the government, offers a £150 discount on winter electricity bills for eligible low-income and vulnerable households. This year, the program has been expanded to include approximately 2.7 million more households, reaching an estimated total of six million beneficiaries.
Currently, the costs of the scheme are recuperated by suppliers through the standing charge, a fixed daily fee applicable to all customers irrespective of their energy consumption. Under the new proposal, these costs would be shifted to the unit rate, the per-kilowatt charge for gas and electricity, starting from April next year.
While the majority of households, including 60% of low-income families with lower energy usage, are expected to benefit from this change, higher energy users, such as households charging electric vehicles at home, may face increased costs due to the shift to unit charges.
Simultaneously, the government is implementing measures to reduce average energy bills by £150 annually, including ending the Energy Company Obligation and transitioning funding for the Renewables Obligation to general taxation. These combined actions are projected to result in significant cost reductions of up to £395 for high-energy users reliant on electric storage heating.
In a social media post, Moneysavingexpert.com founder Martin Lewis explained that the proposed changes could lead to a decrease in standing charges and unit rates, making energy bills more affordable for consumers. He emphasized the negative impact of high standing charges on consumers, especially those with low energy consumption, and welcomed the shift towards more equitable pricing structures.
The government’s consultation indicates that around 16.5 million households, including 2.8 million low-income households, stand to benefit from the proposed adjustments. However, approximately 12 million households may experience increased costs due to the shift. Despite this, when factoring in the £150 in Budget measures, these households are still projected to save £138 per year.