Minister for Energy Consumers (): I am today announcing
the publication of the Government's response to the December 2025
consultation on Warm Home Discount cost recovery. The response
confirms our intention that the costs of the Warm Home Discount
should be recovered from the unit rate for electricity and gas
from 1 April 2026, subject to changes to the price cap
methodology that Ofgem has consulted on separately.
Since its inception in 2011, the Warm Home Discount has delivered
over £4.53bn in support across Great Britain, primarily
benefiting those in or at risk of fuel poverty. It remains a key
policy in the Government's programme to tackle fuel poverty and
reduce energy costs for low-income households, primarily through
the provision of £150 energy bill rebates each winter, funded
through a levy on domestic gas and electricity customers.
This Government recognises the pressure on the cost of living.
Tackling fuel poverty and reducing energy bills remain
priorities. At the Budget, the Government announced measures
expected to take an average of £150 off household energy bills
from April 2026. Moving Warm Home Discount cost recovery to the
unit rate complements these wider steps to improve fairness and
affordability as it means that those who use less energy pay less
towards the policy costs. We have also published the Warm Homes
Plan and the Fuel Poverty Strategy for England, which together
set a pathway to lift up to one million households out of fuel
poverty by 2030.
Between 8 December 2025 and 6 January 2026, we received 778
responses from individuals, consumer and advocacy groups, energy
suppliers and other stakeholders. Overall, there was strong
support for moving cost recovery away from the standing charge
and onto the unit rate on fairness grounds for low‑use
households.
Having considered the evidence, the Government has decided that
unit rate recovery will proceed from April 2026. This approach
links contributions more closely to actual consumption and is
fairer for lower‑use customers. We recognise concerns about
households with unavoidably high energy needs, such as those
using electric heating or medical equipment. When taken together
with wider bill changes announced at Budget, the net impact on
typical consumers is expected to be a reduction in costs. For
example, modelling suggests that a typical high‑usage,
electrically heated household might save £395 annually when the
switch to unit rates is combined with the measures announced at
Budget.
To support accurate and fair delivery, we will update energy
supplier reconciliation arrangements so that their obligations
are settled against energy volumes supplied. We will also
introduce an industry‑wide feedback mechanism so that any
aggregate under‑ or over‑recovery arising from differences
between forecast and actual demand in one scheme year is
corrected in the following year. As with this scheme year, we
also intend to continue with earlier interim reconciliation for
the next scheme year and will keep the arrangements under review,
working with Ofgem and engaging industry as needed.
The consultation also sought views on placing a greater share of
Warm Home Discount recovery on gas to support wider rebalancing
between gas and electricity. We are not proceeding with this at
this stage because of concerns about potential distributional
impacts on low‑income, gas‑reliant households, particularly in
colder or less efficient homes.
Subject to Ofgem's related price cap methodology changes and
Parliamentary approval, the Department for Energy Security and
Net Zero will lay the Warm Home Discount (Reconciliation)
Regulations 2026 later this year. We will work with Ofgem and
energy suppliers to support a smooth transition from 1 April
2026.
