Warm Home Discount Cost Recovery Consultation: Government Response

I am today announcing the publication of the Government’s response to the December 2025 consultation on warm home discount cost recovery. The response confirms our intention that the costs of the warm home discount should be recovered from the unit rate for electricity and gas from 1 April 2026, subject to changes to the price cap methodology that Ofgem has consulted on separately.

Since its inception in 2011, the warm home discount has delivered over £4.53 billion in support across Great Britain, primarily benefiting those in or at risk of fuel poverty. It remains a key policy in the Government’s programme to tackle fuel poverty and reduce energy costs for low-income households, primarily through the provision of £150 energy bill rebates each winter, funded through a levy on domestic gas and electricity customers.

This Government recognise the pressure on the cost of living. Tackling fuel poverty and reducing energy bills remain priorities. At the Budget, the Government announced measures expected to take an average of £150 off household energy bills from April 2026. Moving warm home discount cost recovery to the unit rate complements these wider steps to improve fairness and affordability as it means that those who use less energy pay less towards the policy costs. We have also published the warm homes plan and the fuel poverty strategy for England, which together set a pathway to lift up to 1 million households out of fuel poverty by 2030.

Between 8 December 2025 and 6 January 2026, we received 778 responses from individuals, consumer and advocacy groups, energy suppliers and other stakeholders. Overall, there was strong support for moving cost recovery away from the standing charge and on to the unit rate on fairness grounds for low-use households.

Having considered the evidence, the Government have decided that unit rate recovery will proceed from April 2026. 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 the 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 the Budget.

To support accurate and fair delivery, we will update energy supplier reconciliation arrangements so that their obligations are settled against energy volumes supplied. We will also introduce an industry-wide feedback mechanism so that any aggregate under or over-recovery arising from differences between forecast and actual demand in one scheme year is corrected in the following year. As with this scheme year, we also intend to continue with earlier interim reconciliation for the next scheme year and will keep the arrangements under review, working with Ofgem and engaging industry as needed.