Brits could save £395 per year following major change to energy bills | Personal Finance | Finance

Households could save up to £395 annually, as the Government announced cuts to Standing Charges. Starting April 1, the Government is restructuring how the Warm Home Discount is funded by moving the cost from fixed Standing Charges to Unit Rates (the price you pay per kWh of energy used). 

The Government says this could lead to annual savings of up to £395 for those who are careful with their heating and electricity. The move shifts from a «fixed rent» to a «pay-as-you-go» model. However, it could mean that while low-energy users will see their bills drop, high-energy households may see their costs remain steady or even rise, as they pay more per unit used. This is because the Government is taking the £39 annual fee, which funds the Warm Home Discount, out of your fixed daily Standing Charge and moving it onto your Unit Rate (what you pay per kilowatt-hour).

Minister for Energy Consumers Martin McCluskey said: «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.»

During the Autumn Budget, the Government announced it would be removing green levies in April, which it claims could knock £150 off the average annual bill.

He said: «It’s only a baby step, but it’s a step in the right direction. I now hope Ofgem follows this route in its long-term consultation on the future structure of energy bills.

«The current Standing Charge is a moral hazard that disincentivises lower usage and keeps bills high for people who use very little energy. It’s the biggest single cause of complaint I get about energy bills, by a mile.

«Paying £300+ a year simply for the facility of having energy is too much. It also penalises older people who don’t use gas in the summer yet still pay for it every day.»