The new measures will reduce the cost of the governments’ Energy Company Obligation (ECO), an initiative aimed at increasing the energy efficiency of Britain’s homes.
It is estimated that the move will remove between £30 and £35 from the average household energy bill, as of next year.
The Department of Energy and Climate Change (DECC) also said it would be reducing levies, resulting in a further £12 being taken off energy consumer bills.
Ed Davey: Package will ‘save households around £50 on average’
Speaking after the announcement, Energy and Climate Change Secretary Ed Davey said: “Energy bills are a big concern for many people, which is why we’ve been working to reform the energy market, increase competition and make it easier for people to shop around and switch supplier.
“Today’s announcement confirms a serious, workable package which would save households around £50 on average.”
Energy firms to implement price cuts
British Gas, the UK’s largest gas and electricity supplier, has said that it will reduce gas and electricity prices by an average of 3.2% (£41) for the average dual fuel bill. There will be an extra £12 rebate for the warm home discount scheme.
SSE expects its average customer to save roughly 4% (£50), before the end of March 2014. The rest of the big six energy suppliers – EDF, E.ON, npower and ScottishPower – have said they would follow suit
‘Changes will now allow us to help more people at a lower cost’
Managing Director at British Gas Chris Weston said: “British Gas is pleased to be cutting energy bills by an average of £53 from 1 January.
“We have been able to do this because the government has committed to making changes to the environmental and social obligations that are paid for through energy bills. These changes will now allow us to help more people at a lower cost.”
‘A welcome reduction to energy bills’
Ann Robinson, director of consumer policy at uSwitch said: “This is a welcome reduction to energy bills coming at a time when over eight in ten households were expected to be rationing their energy use this winter for fear of cost. We would now urge suppliers to pass these cuts on as swiftly as possible so that consumers can feel the benefit immediately.
“However, it’s important that consumers understand that even if this reduction is passed on in full their bills will still be higher than they were previously – the reduction won’t be enough to wipe out recent price hikes. It’s also vital that they do not walk away from this thinking that they have a cast-iron guarantee that they are protected from future hikes – they aren’t. If wholesale prices change significantly then they could still see their bills go up.
“The fact remains that while the Government is giving a very welcome hand, consumers can build on this and protect themselves further by making sure they move to the most competitive tariff for their needs, many of which are fixed price and will therefore protect them completely from price hikes for anything up to four winters.
“I would also urge consumers to take note of the Government’s emphasis on energy efficiency, as making our homes efficient is a key step in the battle for lower energy bills. The fact that the part of ECO that helps vulnerable consumers will continue at its present level and that Green Deal is to be strengthened and streamlined is particularly welcome.”