Billpayers to benefit from an average of £150 off the
costs of energy bills.
From: Department for Energy
Security and Net Zero
We announced in the Autumn Budget that we
will cut the cost of
living, including by taking an average of £150
off the costs of household energy bills from April
next year.
This energy bill support is on top
of extending the £150 Warm Home Discount
to around a further 2.7 million of the poorest
households, with up to 6 million households now
receiving the discount.
Where is the saving coming from?
The Energy Company Obligation (ECO) and Renewables
Obligation (RO)
schemes are currently funded through costs
to your bill.
ECO funding will end
from 31 March 2026. 75% of RO costs will now be
funded from general taxation.
The savings from this will take effect from 1
April 2026.
What will this mean for my energy bill?
Ofgem update
the price cap every 3 months so that people on default tariffs
pay a fair price for their energy, and suppliers can cover their
costs. Ofgem will
confirm the price cap for the period April to June 2026 in
February 2026.
The intervention in this Budget will bring down policy costs on
the bill. There are other factors that make up your energy bill,
the single largest of which is the wholesale cost of energy, set
by global markets, which makes up around 40% of the cost you pay.
Other costs within your bill include those needed for upgrading
our national energy infrastructure to ensure it can provide
secure and reliable supplies to homes and businesses.
What will happen if you are on a fixed tariff?
We expect these savings to be passed on to customers on fixed
tariffs from April 2026. These changes will continue to affect
bills for the next 3 years.
How did we calculate the £150 cost saving?
The £150 is a rounded £154 average per household figure.
We forecast that funding 75% of RO through general taxation
should save £88. Not renewing ECO should save £59.
These measures together should save £7 in VAT.
For more detailed calculations, see Budget 2025: Data
Sources.
For a ‘typical'
dual-fuel medium household as defined by Ofgem, the
impact is equivalent to £134 off the price cap. This is based
on policy
costs in the latest price cap, which equate to:
- £24.80/MWh off the
unit rate for 75% of RO (excluding VAT)
- £8.91/MWh off the
electricity unit rate for ECO
- £3.15/MWh off the
gas unit rate for ECO
This is because the typical household uses less electricity than
an average across all households.
What does this mean for different types of
household?
|
Type of household
|
Estimated electricity and gas usage per year
|
Bill cost saving £/year equivalent
including VAT
|
|
Typical dual fuel household, 2‑3 bedroom house, 2‑3 people
with typical Price Cap consumption levels
|
2.7 MWh electricity,
11.5 MWh gas
|
£134
|
|
High demand rural household with poor energy efficiency
|
3 MWh electricity,
30 MWh gas
|
£205
|
|
Gas-heated house with medical equipment and constant
heating
|
4 MWh electricity,
25 MWh gas
|
£224
|
|
Low demand flat or 1 bedroom house with 1‑2 people
|
1.8 MWh electricity,
7.5 MWh gas
|
£88
|
|
High-use electric storage heated household
|
12.5 MWh electricity,
no gas
|
