Millions of households could see an annual saving of £39 on their energy bills following proposed changes to the funding structure of the Warm Home Discount scheme. The government is seeking feedback on a plan 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 period for this proposal will close on January 6.

Renowned consumer advocate Martin Lewis praised the initiative, stating it is a step in the right direction. The Warm Home Discount program, managed by the government, offers a £150 discount on electricity bills to qualifying low-income and vulnerable families during the winter season. The scheme has been expanded to cover approximately six million households this winter, up from around 2.7 million previously.

Currently, suppliers recover the scheme costs through the standing charge, a daily fee charged to all customers irrespective of their energy usage. The proposal suggests shifting this cost to the unit rate, the charge per kilowatt for electricity and gas, starting in April.

While the majority of households, especially low-income ones with lower energy consumption, are expected to benefit from this transition, higher energy users, such as households charging electric vehicles at home, may face increased costs due to the shift to the unit rate.

Simultaneously, the government is set to implement a £150 annual reduction in average energy bills as part of broader measures announced in the Budget. These measures include ending the Energy Company Obligation and reallocating funding for the Renewables Obligation to general taxation. The government estimates potential savings of up to £395 for high-use households reliant on electric storage heating.

According to the government’s consultation, approximately 16.5 million households, including 2.8 million low-income households, are expected to benefit from the proposed changes. However, around 12 million households may experience financial losses solely from this adjustment. When factoring in the Budget measures, these households are projected to be £138 better off annually.

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