Households to save an average of £190 on energy bills after latest government move

Bill payers across the UK are set to see a major reduction in their energy costs this year after the government announced standing charges will be reduced.

From 1 April, energy suppliers should begin to recover costs for the warm home discount scheme from the electricity unit rate, rather than from the standing charge.

This will reduce the charge by an average of £40 for the average household, estimates suggest. It comes on top of Rachel Reeves’s Budget pledge to reduce household bills by £150 a year through scrapping an energy efficiency programme.

Overall, households will benefit from an average of £190 from the two measures combined. Some could also potentially benefit much more, the Department for Energy and Net Zero (DESNZ) found in a new report.

In its consultation on changing the standing unit, the department gives the example of a “high-usage electric heated household” which, when both changes are taken together, will save approximately £395 from their energy bills next year.

The DESNZ report added: “The shift also aligns with the government’s manifesto commitment to reduce standing charges, as well as broader efforts to improve transparency, consumer choice, and fairness in energy pricing.”

Paid by all households, the standing charge on an energy bill represents a baseline that must be paid to the supplier, even if no electricity is used. Under the current Ofgem price cap, the average household pays around 55p a day for electricity and 35p for gas, equating to £328 a year.

Reacting on social media, money saving expert Martin Lewis said: “It’s only a baby step, but it’s good to see some movement in the right direction. I think this is a totem of the direction of travel, and having spoken to both Ed Miliband and the Ofgem boss about this, I think they are hearing the mood music about the standing charge.

“The 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-plus a year simply for the facility of having energy is too much. It also penalises people, especially older people, who don’t use gas in the summer yet still pay for it every day.”

Minister for energy consumers Martin McCluskey said: “This government is relentlessly focused on the cost of living, which is why we have acted to take an average of £150 of costs off energy bills from April.

“We are also acting to make our energy system fairer. We know that standing charges are a big concern for many households, especially those on low incomes.

“That is why we have taken the decision to bring down these fixed costs, creating a fairer system and delivering savings for households who use less energy.”