Credit: iStock – Highwaystarz-Photography
The government is exploring moves to axe the Energy Companies Obligation (ECO) and use Warm Homes Plan (WHP) cash to deliver the scheme’s energy efficiency and home decarbonisation works instead.
Last week, it emerged that the Treasury and No 10 Downing Street are looking at cutting ECO – an obligation on energy suppliers to provide home upgrades – to help reduce customers electricity and gas bills.
Chancellor of the Exchequer Rachel Reeves was already mulling stripping VAT from energy bills.
However, Prime Minister Sir Keir Starmer is understood to have expressed concern that savings from this cut will be swallowed up by the approximately £100 increase in charges for electricity network upgrades, which are set to be added to bills from next April.
However, transferring the ECO over the remaining years of the current Parliament onto the WHP would swallow a large proportion of the £13.2bn confirmed for the home upgrade programme in last summer’s comprehensive spending review. ECO is currently worth £1.6bn per annum.
The reports have sparked concerns that other planned elements of the WHP, the publication of which was delayed last month, are at risk of being cut.
Heat network developers have written to Reeves with a pledge to achieve by 2030 a 7.5% reduction in the capital cost of building the communal systems and a 20% cut in the cost of electricity they consume.
Yselkla Farmer, CEO of BEAMA, a UK trade association for manufacturers of energy infrastructure technologies, said the Chancellor’s mooted cuts risk sending the ‘wrong signal’ at a critical time for the UK’s energy transition.
‘While removing levies rather than refocusing their cost base may be a politically attractive way to rapidly deliver small reductions to energy bills, it is a false economy, locking households into higher bills for longer by delaying adoption of low carbon heating solutions that will deliver much greater savings.’
