Millions of households could see an annual saving of £39 on their energy bills due to proposed changes in the funding structure of the Warm Home Discount scheme. The government is seeking to transfer the costs from the fixed standing charge to the variable unit rate, benefiting low-income households and those with lower energy consumption. The consultation on this matter will conclude on January 6.
Renowned consumer advocate Martin Lewis praised the initiative, stating that it is a step in the right direction. The Warm Home Discount scheme, administered by the government, offers a one-time £150 discount on electricity bills for qualifying low-income and vulnerable households during the colder months. The scheme has been expanded to cover approximately six million households for the upcoming winter season.
Currently, suppliers recover the costs through the standing charge, a set daily fee applied to all customers regardless of their energy usage. The proposal aims to shift this cost to the unit rate, the charge per kilowatt for electricity and gas, starting from April next year. While the majority of households, especially low-income ones with lower energy consumption, are expected to benefit from this change, higher energy users might face increased costs, including households that charge electric vehicles at home.
Simultaneously, the government is implementing a £150 annual saving on average energy bills as part of measures announced in the Budget. These measures involve ending the Energy Company Obligation and transferring funding for the Renewables Obligation to general taxation. The government anticipates significant cost reductions, particularly for high-use households relying on electric storage heating, with savings potentially reaching up to £395.
Moneysavingexpert.com founder Mr. Lewis highlighted the potential impact of these changes, emphasizing that the switch could lead to a decrease in standing charges and unit rates. He pointed out the drawbacks of the current standing charge system, stating that it discourages lower energy usage and disproportionately affects individuals with minimal energy consumption. The government’s consultation suggests that around 16.5 million households, including 2.8 million low-income households, could benefit from the shift, while 12 million households might experience negative effects. However, factoring in the Budget measures, those adversely impacted would still be £138 better off annually.
The proposed adjustments aim to create a fairer system that benefits a larger portion of households while addressing issues related to energy costs and consumption.