Millions of UK households are set to receive a welcome reduction in their energy costs, with an average saving of £150 per year arriving from April 2026. The cut follows Chancellor Rachel Reeves's announcement in the Autumn Budget to scrap a long-running energy efficiency programme.
Budget Move Scraps "Failed" Scheme
In a significant shift, the government has decided to abolish the Energy Company Obligation (ECO) scheme, which was introduced under the previous Conservative administration. Chancellor Reeves labelled the initiative as a "failed" scheme, arguing it had added £1.7 billion per year to collective household bills.
By terminating the ECO and moving some policy costs into general taxation, the Treasury has paved the way for direct savings for consumers. The reduction will be applied from 1 April 2026, effectively lowering the energy price cap.
How Major Suppliers Are Passing On The Savings
Leading energy firms have now confirmed they will pass the full saving on to their customers. Financial expert Martin Lewis shared the news on social media platform X, detailing how the cut will work.
Octopus Energy, British Gas, and E.ON have all stated they will apply the saving by cutting all customers' rates by £150 from 1 April 2026. Crucially, this includes customers on fixed-term tariffs, who will see their agreed rates adjusted downwards.
Greg Jackson, CEO of Octopus Energy, confirmed the changes from the Budget would be applied to customers automatically. An E.ON Next spokesperson was unequivocal, stating: "When these savings start in April, we’ll pass them on in full to all our customers. No ifs. No buts. No small print."
Similarly, British Gas welcomed the move, having previously called for levies to be shifted to general taxation, and confirmed all its customers would benefit.
Savings for OVO and EDF Customers
The remaining two of the "big five" suppliers, OVO and EDF, have also pledged to pass on "the savings in full" to their customers in 2026. However, they are yet to publicly confirm the precise mechanism or timing for doing so.
The government has made it clear it expects all suppliers to ensure the savings reach every household from the April start date, including those locked into fixed contracts.
Understanding the Impact on Your Bill
According to Martin Lewis's analysis, the £150 average saving will be achieved through adjustments to unit rates. The price cap reduction is expected to come from a 3.5p per kWh cut in electricity prices (around 13%) and a 0.35p per kWh cut in gas prices (around 6%), assuming other market factors remain constant.
However, he offered a note of caution, explaining that as the price cap was predicted to rise in April 2026, the actual net reduction felt by households will be slightly less. The current prediction is for a roughly 6% reduction in the April price cap compared to the preceding January level.
This policy marks a direct intervention aimed at easing the cost of living, with the clear intention of putting money back into the pockets of energy consumers across the country.
