Millions of households are expected to see an annual saving of £39 on their energy bills as the government proposes a change in funding for the Warm Home Discount program. The consultation aims to shift the funding source from the standing charge to the unit rate, benefiting low-income households and those with lower energy consumption. The consultation period concludes on January 6.
Renowned consumer advocate Martin Lewis praised the proposal, calling it a step in the right direction. The Warm Home Discount scheme, managed by the government, provides a one-time £150 discount on electricity bills for eligible low-income and vulnerable households during winter. This winter, the scheme has been extended to approximately six million households, an increase of around 2.7 million.
Currently, the costs of the scheme are recuperated by suppliers through the standing charge, a fixed daily fee applied to all customers. Under the new proposal, the costs would be shifted to the unit rate, which is the charge per kilowatt for electricity and gas, starting from April next year.
While most households, including 60% of low-income ones with lower energy consumption, are expected to benefit from this change, high-energy users, such as households charging electric cars at home, may face increased costs due to the shift to the unit charge.
Simultaneously, the government’s promised £150 yearly saving on average energy bills will take effect following measures outlined in the Budget. This includes ending the Energy Company Obligation and transferring funding for the Renewables Obligation to general taxation. The government projects reductions in costs, particularly beneficial for high-use households reliant on electric storage heating.
According to the consultation, approximately 16.5 million households, including 2.8 million low-income households, are projected to benefit from this shift, while 12 million households may experience a negative impact solely from this measure. Nevertheless, factoring in the Budget measures, households are expected to be £138 better off annually.
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