UK households could see as much as £154 a year cut from their energy bills, starting in April 2026. This is because the government is cutting two green levies that providers are currently adding to customers' energy bills.
The Energy Company Obligation (ECO) scheme will be ended, while 75% of the 'renewables obligation' – a levy that funds renewables projects – will be taken off electricity bills. The government said these cuts will save £154 for the average household.
Announcing the measure as part of the Autumn Budget, Chancellor Rachel Reeves said: "[ECO] costs households £1.7 billion a year on their bills and for 97 per cent of families in fuel poverty, the scheme has cost them more than it has saved.
"It is a failed scheme, so I am scrapping that scheme along with taking other legacy costs off bills."
Some pre-Budget reports had suggested Reeves could go further to reduce utilities costs by scrapping VAT on energy bills, though this would have disproportionately benefited higher usage households. Ultimately, focusing on green levies instead was judged to be a more effective measure.
How much will households save on their energy bills?
Energy bills in the UK include a charge for the amount of energy that household has used, plus a 'standing charge'. This comprises all of the other expenses associated with supplying a home with energy, including business costs, network upgrades, the cost of moving energy around, and contributions towards social and environmental schemes.
Standing charges have increased in recent years and some have blamed this on higher green levies, though the standing charges are ultimately set by the supplier.
To reduce this element of household utility bills, the government has chosen to cut 75% from the 'renewables obligation'. This is the amount that is added to household energy bills to fund energy companies' investment in renewables. Instead, it will be paid through general taxation. This is expected to save £88 on average.
The Energy Company Obligation (ECO) scheme will not be renewed, saving £59 on average.
With these two cuts taken, there will also be a £7 VAT saving. This leaves a total of £154 off bills for the average household, according to government calculations. However, it is important to note that only a small percentage of the standing charge is affected by government levies. The cost of maintaining the UK's energy infrastructure is a much more significant contributor. So while these cuts will be welcomed by bill payers, any additional major works or energy projects in the coming months could quickly eradicate the saving.
What is the ECO scheme and why has it been scrapped?
The Energy Company Obligation (ECO) is a scheme designed to reduce fuel poverty and harmful emissions. It essentially obligates energy suppliers to promote measures that help certain households heat their homes or reduce energy usage. This can include installing insulation or upgrading a heating system. The cost of the scheme is paid for through levies on all household energy bills.
There has been a significant amount of controversy surrounding the scheme in recent months, with an October 2025 report by the National Audit Office (NAO) finding considerable failings in the installation of insulation under the scheme, leaving many homes in need of repair. This has ultimately simplified the Treasury's search for a way to cut energy bills and the scheme will not continue beyond 31st March 2026, though a nine-month partial extension – subject to Parliamentary approval – will allow existing work to be finished.
Grants for energy-efficiency measures will continue for some low-income households through the Warm Homes Plan, which will receive an additional £1.5 billion investment.
Greg Jackson, founder of Octopus Energy, said: "The ECO scheme had become simply too wasteful, adding high costs to everyone's bills and only delivering meagre savings for recipients. A reset through the Warm Homes Plan is the right approach."
However, the decision to scrap ECO altogether has not been universally popular. Chaitanya Kumar, head of economic and environmental policy at the New Economics Foundation, said: "By cutting £6.4bn of ECO support and replacing it with a £1.5bn fund [the Warm Homes Plan], the budget potentially leaves thousands of low-income households stranded in cold, inefficient homes and denies them the permanent savings that energy-efficiency reliably delivers."
What to do if you're struggling to afford your energy bills
Your energy supplier may be able to help you arrange an affordable repayment plan if the cost of energy is becoming overwhelming, so it is best to contact them as soon as possible. We provide some tips if you are struggling to afford your energy bills in our article 'How to save money on your energy bills'.
There are also a number of grants and schemes available for those who are most vulnerable. More information and help on the cost of living can be found in our Cost of Living guide.
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