Energy UK published a policy paper on 22 July 2024 setting out measures it says the Government should take to make bills affordable this winter. The industry body proposes funding the Energy Company Obligation (ECO) and the Great British Insulation Scheme through Government spending, moving remaining policy costs onto gas bills, and doubling the Warm Home Discount for the most vulnerable households1.
The paper states that the price cap is set to rise from 1 October 2024, "with a likely increase of around 10% from the current £1,568 to £1,723.06", and that Ofgem will publish the actual cap rates on 23 August 20241. Energy UK puts policy costs on domestic bills at around £5 billion per year, or almost £200 (£188) per typical household annually. It says funding ECO and GBIS would cost about £1.5 billion a year, and that funding the legacy Renewables Obligation and Feed-in Tariffs would cost around £3 billion a year, falling from 2027 as those schemes wind down1.
On debt, Energy UK cites Ofgem's figure of £3.32 billion owed by domestic customers, which it calls "likely to be a significant underestimate". Where no payment plan is in place, average debt in the first quarter of 2024 was £1,452 for electricity and £1,264 for gas, annual increases of 19% and 31% respectively. Citizens Advice clients owed an average of £1,835 by the end of 2023, up from £1,579 a year earlier. National Energy Action has highlighted around 6 million households in fuel poverty1.
Energy UK says rebalancing policy costs to a ratio of electricity to gas prices of around 3:1 would make low-carbon technologies cheaper to run than fossil fuels. It states that households with electric heating could save up to £400 per year, or up to £550 for those eligible for the Warm Home Discount. It adds that gas-heating households would see a small increase because there are fewer gas customers than electricity customers, but that "no low-income household would be worse off" if the measure is implemented correctly1.
"Energy UK believes this package of reform could have an immediate and sustained effect for bringing down the price of energy for households across the country."
Why it matters for households
Policy costs are a fixed part of every domestic bill, and Energy UK's figures put them at £188 a year for a typical household, with the Renewables Obligation alone adding £86 to electricity bills and Feed-in Tariffs £211. Because these costs sit mainly on electricity, they work against homes that install heat pumps, batteries or electric vehicle charging, since running costs stay higher than gas. Moving them changes the running-cost arithmetic for any household considering electrification, and the paper's own estimate is a saving of up to £400 a year for those with electric heating.
The debt figures describe households already behind: average arrears of £1,452 on electricity and £1,264 on gas where no repayment plan exists1. A cap rise of around 10% in October would add to that pressure. Doubling the Warm Home Discount would raise the current £150 annual payment, which Energy UK notes is lower than the typical household pays in policy costs.
What happens next
Ofgem will publish the actual cap rates on 23 August 20241. Energy UK also calls for a cross-departmental Director General-led working group on data and data access to support targeted bill support from winter 2025, with completion expected in time for that winter1. Whether the Government adopts any of the proposals has not been reported.