Millions of households could see an annual saving of £39 on their energy bills due to proposed changes in funding for the Warm Home Discount scheme. The government is seeking feedback on a plan to shift the funding burden from the fixed standing charge to the variable unit rate for energy consumption, which would particularly benefit low-income households struggling to afford heating and lighting. The consultation period for this initiative will conclude on January 6.
Renowned consumer advocate Martin Lewis praised the proposed shift, stating it is a step in the right direction. The Warm Home Discount scheme, managed by the government, offers a £150 reduction on electricity bills to qualifying low-income and vulnerable households during winter. The scheme has been expanded to cover an estimated six million households this winter.
Currently, the costs associated with the discount scheme are recouped by energy suppliers through the standing charge, a fixed fee applied to all customers irrespective of energy usage. Under the new proposal, these costs would be transferred to the unit rate, the charge per kilowatt for electricity and gas, starting from April next year.
Most households are expected to benefit from this change, especially low-income households with low energy consumption. However, high-energy users, such as households charging electric vehicles at home, may face increased costs due to the shift to unit charges. Additionally, the government’s commitment to reducing the average energy bill by £150 annually will be implemented through the cessation of the Energy Company Obligation and the transfer of funding for the Renewables Obligation to general taxation. These measures aim to lower costs for high-energy users relying on electric storage heating by up to £395.
In a social media post, Moneysavingexpert.com founder Martin Lewis highlighted the positive impact of the proposed changes on standing charges and unit rates. He emphasized the need to address the high standing charges that disproportionately affect low-energy users and older individuals who do not use gas regularly. The government estimates that 16.5 million households, including 2.8 million low-income households, will benefit from these adjustments, while 12 million households may experience negative impacts. However, factoring in other Budget measures, the majority of households are projected to be £138 better off annually.
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