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 |
£442 |
