Customers of smaller energy suppliers are set to receive a smaller reduction in their bills than the headline £150 promised by the Labour Government, due to a technical loophole in how the saving is calculated.
Ministers have pledged that average annual household energy bills will fall by £150 from April 1 2026 as part of wider efforts to ease pressure on household finances.
However, customers of certain smaller providers are now expected to receive savings closer to £90.
The shortfall stems from the two components that make up the £150 reduction.
One element comes from cutting green levies on domestic energy bills. The second, worth around £60, comes from removing the Energy Company Obligation scheme, known as ECO, which funds energy efficiency improvements for low income households.
Larger suppliers recover the cost of ECO through customer bills, meaning they can pass on the £60 saving when the scheme is removed.
Some smaller suppliers do not charge their customers for ECO, so they have no associated costs to remove. As a result, households with those firms will only benefit from the remaining £90 reduction.
The suppliers affected include 100Green, Fuse Energy, Good Energy, Home Energy and Tulo Energy. Customers with these companies are expected to receive the reduced benefit, prompting concerns about fairness between households on different tariffs.
Households using smaller energy suppliers could receive around £90 instead of the Government’s promised reduction
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A Government spokesman said ministers expect suppliers to pass on savings to customers, adding, “We expect all domestic suppliers to pass on cost savings.” There is currently no requirement forcing companies to make up the missing £60.
Energy Secretary Ed Miliband has acknowledged that ECO accounts for around £60 of the planned reduction.
He urged energy firms to ensure customers receive the full benefit, saying, “We are taking an average £150 of costs off energy bills from April,” and, “Suppliers must do the right thing and pass every penny of those savings onto all households.”
Ministers have not confirmed whether action will be taken if companies fail to do so.
Ed Miliband acknowledged that ECO accounts for around £60 of the planned reduction
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PAOctopus Energy has publicly addressed the issue. Greg Jackson, the company’s chief executive and founder, said Octopus would pass on the savings automatically across all tariffs.
He welcomed the Government’s decision to reduce policy costs on bills, saying the changes would bring “welcome relief” to customers.
Energy policy costs have become an increasing focus for ministers as households continue to face sustained pressure from high bills.
The £150 reduction is intended to provide broad based relief, but the current structure means the full saving may not be delivered to everyone.
Mr Jackson hopes the industry follows the lead of Octopus
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Customers affected by the issue have limited options, and switching suppliers may not guarantee access to the full reduction.
The Government has not said whether it will amend the policy design, though officials have indicated further details will be set out closer to implementation.
For now, households with smaller suppliers face receiving less than the headline figure.
