Millions of households are expected to see an additional annual saving of £39 on their energy bills with proposed changes to the Warm Home Discount funding structure. The government has initiated a consultation to transfer the cost from the fixed standing charge to the unit rate for energy consumption, benefiting low-income households and others with lower energy usage. The consultation period concludes on January 6.
Renowned consumer advocate Martin Lewis praised the proposal, stating it is a step in the right direction. The Warm Home Discount scheme, managed by the government, offers a one-time £150 discount on electricity bills for qualifying low-income and vulnerable households during winter, with an estimated expansion to around six million households this winter.
Currently, suppliers recover costs through the standing charge, a set daily fee for all customers irrespective of 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.
Most households, particularly 60% of low-income ones with lower energy consumption, are likely to benefit from the change. However, higher energy users, such as households charging electric vehicles at home, may face increased costs due to the switch to unit charges.
Simultaneously, the government’s pledged £150 yearly savings on average energy bills are set to be implemented through measures outlined in the Budget, including the end of the Energy Company Obligation and the transfer of funding for the Renewables Obligation to general taxation. The government forecasts significant cost reductions, particularly for high-use households relying on electric storage heating.
Moneysavingexpert.com founder Mr. Lewis highlighted on social media the potential impact, emphasizing the expected decrease in standing charges and unit rates. He underscored the need to address the ongoing issue of high standing charges that penalize low energy users and older individuals who may not use gas year-round.
The government’s consultation indicates that approximately 16.5 million households, including 2.8 million low-income households, stand to benefit from the proposed changes. However, around 12 million households may experience negative effects from the adjustment alone. When factoring in the Budget measures, households are projected to be £138 better off annually.