The government has launched a major consultation that could lead to a significant reduction in energy bills for millions of households across the UK. The proposed shake-up targets the controversial daily standing charge, a fixed fee that customers pay regardless of their energy usage.
Shifting Costs from Standing Charge to Unit Rate
At the heart of the proposal is a plan to change how the costs of the Warm Home Discount scheme are recovered. Currently, a portion of this support for vulnerable households is added to everyone's daily standing charge. The new Labour government is now seeking views on moving this cost onto the unit rate – the price paid for each kilowatt hour of gas and electricity actually used.
If implemented from April 2026, this shift would lop an estimated £39 per year off the average customer's standing charge. This saving would be roughly split between gas and electricity bills.
Experts and Campaigners Welcome "Baby Step"
Consumer champion Martin Lewis, founder of MoneySavingExpert.com, welcomed the consultation. He stated on social media platform X: "Delighted the Government has listened and is consulting on shifting the Warm Home Discount costs off the standing charge and onto the unit rate. This is exactly the right direction."
Lewis explained that the timing aligns with other planned reductions in unit rates, meaning the overall effect should still see both the standing charge and the unit rate fall. He described the move as a "baby step" but a crucial one, adding that the current standing charge is a "moral hazard" that penalises low users and is the "biggest single cause of complaint" he receives about energy.
Why the Standing Charge is So Controversial
The standing charge has long been criticised for its unfair impact. Key criticisms include:
- It disincentivises energy saving, as a large portion of the bill is fixed.
- It disproportionately affects those who use very little energy, such as older people or those in small homes.
- Customers can pay over £300 a year just for the facility of being connected, even if they use no gas in summer months.
The government's consultation, titled Warm Home Discount Cost Recovery, is now open for responses from the public and industry. Martin Lewis urged people to feed into the consultation to ensure the change happens, while also calling on regulator Ofgem to consider this approach in its own long-term review of energy bill structures.
