Millions of households could see an additional £39 in yearly savings on their energy bills as a result of proposed changes to the funding of the Warm Home Discount. The government is seeking feedback on a plan to transfer the cost of the discount from the fixed standing charge to the variable unit rate for energy usage. This shift is aimed at benefiting low-income households and individuals with limited energy consumption, with the consultation period ending on January 6.
Renowned consumer advocate Martin Lewis has praised the initiative, stating that it represents a positive step forward. The Warm Home Discount scheme, managed by the government, offers a one-time £150 reduction on electricity bills for qualifying low-income and vulnerable households during colder months. The scheme has been extended to cover approximately 2.7 million additional households, bringing the total number of beneficiaries to an estimated six million for the upcoming winter season.
Currently, suppliers recover the costs of the discount through the standing charge, a fixed fee applied daily to all customers irrespective of their energy usage. Under the proposed changes, these costs would be shifted to the unit rate, the charge per kilowatt for electricity and gas, starting in April.
Most households are expected to benefit from this transition, particularly around 60% of low-income households with lower energy consumption. However, higher energy users, such as households charging electric vehicles at home, may face increased costs due to the switch to the unit rate.
Simultaneously, the government is implementing a promised £150 annual saving on average energy bills through measures outlined in the Budget. This includes ending the Energy Company Obligation and transferring funding for the Renewables Obligation to general taxation. The government asserts that these combined actions could result in cost reductions of up to £395 for households heavily reliant on electric storage heating.
Moneysavingexpert.com founder Mr. Lewis emphasized the potential benefits of the changes, highlighting the impact on standing charges and unit rates. He pointed out that the standing charge structure discourages lower energy usage and disproportionately affects those using minimal energy, expressing satisfaction with the proposed adjustments.
The government’s consultation indicates that approximately 16.5 million households, including 2.8 million low-income households, stand to gain from the shift in funding mechanisms. However, around 12 million households may experience negative financial impacts from this single measure alone. Factoring in the Budget measures, these households are still projected to be £138 better off annually.
