Millions of households could see an annual saving of an additional £39 on their energy bills as a result of proposed changes to the funding of the Warm Home Discount scheme. The government is seeking feedback on a plan to transfer the cost of the scheme from the fixed standing charge to the variable unit rate for energy usage. This shift is expected to particularly benefit low-income households and those with lower energy consumption, who often struggle to afford heating and lighting. The consultation period for this proposal will conclude on January 6.
Renowned consumer advocate Martin Lewis has praised the initiative, calling it a step in the right direction. The Warm Home Discount scheme, managed by the government, offers a one-time £150 discount on electricity bills to qualifying low-income and vulnerable households during the colder months. This winter, the scheme has been extended to approximately 2.7 million additional households, reaching an estimated total of six million.
Currently, the costs associated with the scheme are recuperated by suppliers through the standing charge, a fixed daily fee applied to all customers irrespective of their energy usage. Under the new proposal, these costs would be shifted to the unit rate, the charge per kilowatt for electricity and gas, starting from April next year.
The majority of 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 be negatively impacted by the shift to the unit rate.
Simultaneously, the government is set to implement a promised £150 annual reduction in average energy bills by abolishing the Energy Company Obligation and reallocating funding for the Renewables Obligation to general taxation. According to government estimates, this combined approach could lead to savings of up to £395 for households heavily reliant on electric storage heating.
In a social media post, Moneysavingexpert.com founder Martin Lewis highlighted the positive impact of these changes, noting that the proposed shift could lead to lower standing charges and unit rates. He emphasized that the current standing charge structure discourages lower energy usage and disproportionately affects individuals with minimal energy consumption, particularly older adults. Lewis expressed satisfaction with the progress, albeit modest, towards rectifying this issue.
The government’s consultation indicates that approximately 16.5 million households, including 2.8 million low-income households, stand to benefit from the funding shift. However, around 12 million households may experience a negative impact solely from this measure. Taking into account the Budget measures, these households are projected to be £138 better off annually.