Warm welcome for Budget home energy cuts

The cuts to energy bills announced in last week’s Budget is a step in the right direction, says Midland Midlands green energy expert Ron Fox.

He was commenting on Rachel Reeves’ two decisions, which together will cut up to £150 from the average household energy bill from April next year.

Firstly, the Chancellor announced she would cut the Renewables obligation scheme (RO) – a green levy on electricity bills – by 75 per cent. This levy is a subsidy for generating renewable electricity, charged to suppliers but fully passed on to consumers. Green levies will now be taken off energy bills and paid through general taxation. The Treasury says this move will save households on average £88 a year.

The government will now refund 75 per cent of this subsidy, leaving 25 per cent to be passed on to domestic electricity bills. This will cost the Treasury £2.3bn per year until it lapses in 2029-30, when the subsidy will be restored to 100 per cent, according to the Office for Budget Responsibility (OBR).

Secondly, the Chancellor said she would also scrap the Energy Company Obligation (ECO) scheme, a levy which forced suppliers to contribute to energy efficiency improvements like insulation. This will give householders a further £59 saving a year.

“Making electricity cheaper for customers is good news and is also crucial for people moving to low-carbon sources such as green electric heating and electric vehicles,” said Ron, of Noreus Ltd on the University of Keele Science Innovation Park.

He added: “The ECO scheme had become simply too wasteful, adding high costs to everyone’s bills and only delivering meagre savings.”

Energy suppliers charge for the wholesale cost of electricity and gas, but also for all the other associated costs, which come in the form of standing charges.

These have ballooned in recent years, as green levies have been piled onto people’s energy bills.

The Government will no longer fund the ECO on bills after March 2026, but will instead give direct funding to households facing fuel poverty by extending the £150 Warm Home Discount.

Energy bills have continued to rise, with the price cap having risen to £1,755 for the final quarter of this year, more than £600 higher than when it was introduced in 2019.

The government has made tackling energy costs a key mission, but it has faced criticism that its investment in green energy was driving up household bills.

One other green measure in the budget was that drivers of electric vehicles will be charged 3p per mile and 1.5p for drivers of plug-in hybrid cars on top of other road taxes from 2028. The average driver of a battery electric car, who clocks up 8,500 miles a year, is expected to be charged £255 in the year 2028-29. This is a move by the government to plug the hole left by falling fuel tax receipts.

“I just hope this doesn’t put motorists off switching from petrol to electric cars,” said Ron. “On the whole I warmly welcome the Budget measures as it will bring respite to many households who have struggled with high energy costs over recent years. But I hope there will be other schemes to encourage people to make their homes more energy efficient with better insulation and so cut their energy bills further.”

For those wanting more advice about green energy and insulating their home call Ron on 0845 474 6641 or go to www.noreus.co.uk.

Caption: Powerful message with a cut in electricity bills in the Budget.

Picture: John Butterworth