Decision briefPublic-policy proposalReviewed 2026-10-04
Decide who pays the remaining policy costs on electricity bills — and protect households who cannot switch from gas
The thread: issue, evidence, action
- Issue Weakness: At the October 2022 peak, households in the second-lowest income tenth faced 13.6% annual inflation on ONS’s Household Costs Indices, against 11.6% in the second-highest tenth. Also: threat, opportunity
- Evidence Annual inflation for the second-lowest income tenth (Household Costs Indices)
- Action Make electricity pricing support cheaper clean heating
- Decision required
- DESNZ and the Treasury, with Ofgem, re-model three ways of handling the policy costs still on electricity bills — move them to gas bills, move them to general taxation, or leave them and target help through a bigger Warm Home Discount — on today’s tariffs, by heating type and income, and choose one before the Exchequer’s funding of 75% of the Renewables Obligation ends after 2028–29.
- Who and where
- Households in Great Britain, separated by heating type (electric, gas, off-gas other fuels) and income — with low-income gas households who cannot switch named as the group to protect. Applies in: Great Britain.
- Accountable body
- Department for Energy Security and Net Zero and HM Treasury; Ofgem for the price-cap methodology
- Intervention
- Move the remaining policy costs off electricity unit prices (to gas bills or to taxation), or offset them for low-income households with targeted discounts.
- Best evidence, and where it applies
- Nesta’s 2025 modelling: moving the Renewables Obligation and Feed-in Tariffs to gas bills, with wider bill support, cut bills for about 8 million households and raised them by about £76 a year for gas households not eligible for support (about £20 if other levies also moved to taxation, at about £1.1bn a year). That was before April 2026, when most of the cost already moved to taxation; UKERC now puts remaining policy costs at about a tenth of an electricity bill. Not yet re-modelled.Studied in: Great Britain households by heating type and eligibility for bill support (April–June 2025 Ofgem price cap).How closely the comparison transfers to this decision: France: pilot in Ardèche, Aveyron, Côtes-d’Armor and Pas-de-Calais — partial; Seven low-income communities, New Zealand — partial.
- Extra cost of this change
- Capital: none identified in the brief.Recurring: Further levy rebalancing from electricity to gas or taxation — Not yet costed; Protection for households who cannot switch from gas — Not yet costed.One-off or mixed: Distributional re-modelling and consultation on the post-April 2026 baseline — not yet established.
- Funding
- Not funded yet: a possible funding route exists, but nothing is allocated to this change.Committed to this change: none.Possible source, not an award: none identified.Unfunded: Not costed on the current baseline; from 2029–30 the 75% Renewables Obligation share returns to bills unless a new decision is made.
- Savings and wider benefits
- Not yet specified: no cashable saving or avoided cost has been costed for this change. Expected outcomes are listed one by one in the research appendix and are never added together or counted as money available.
- First 90-day step
- DESNZ and Ofgem publish distributional modelling of the three designs on post-April 2026 tariffs, by heating type and income decile.The proposed first milestone; a 90-day date is not yet specified. Owner: DESNZ with Ofgem. Proposed by UK Facts, not an official deadline.
- Twelve-month milestone
- Not yet specified.Time to a first useful result: Modelling within months; bill effects from the first price-cap period after any change; heat-pump uptake over several years.
- Outcome, and when to scale or stop
- Measure: The unit price ratio and heat-pump installations each quarter; Warm Home Discount receipt among eligible low-income gas households.Scale if: Electric heating becomes cheaper to run relative to gas and heat-pump uptake rises, without fuel poverty rising among low-income gas households.Stop if: The design raises fuel poverty overall, or cannot be targeted to protect households who cannot switch.
- Main trade-off
- Every design moves cost rather than removing it — to gas households, to taxpayers or to other bill-payers — and none of them lowers general inflation, which is the Bank of England’s job.
- Source and review date
- How to make electricity cheaper (position paper) and Options for levy reform (technical report) (5 June 2025); The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (28 July 2026). Reviewed 2026-10-04.
An editorial proposal by UK Facts for discussion, not government policy. Records: A17 · effects E-A17-HEATPUMP, E-A17-GAS-HOUSEHOLDS · costs C-A17-TRANSFER, C-A17-PROTECTION
Research appendix: study design, effect sizes and limits, alternatives, full costing, international comparisons and how we would know
1.The change, in plain words
Decide who pays the remaining policy costs on electricity bills — and protect households who cannot switch from gas
2.The decision requested
- Decision
- Commission DESNZ and Ofgem to publish distributional modelling of three specified designs on the post-April 2026 tariff baseline, by heating type and income decile, with compensation options; consult; and take the decision together with the Treasury’s decision on the Renewables Obligation funding after 2028–29.
- Accountable institution
- Department for Energy Security and Net Zero and HM Treasury; Ofgem for the price-cap methodology
- Geography
- Great Britain
- Powers
- Levy schemes are set in legislation (the Renewables Obligation orders, Feed-in Tariffs and Warm Home Discount regulations); moving costs between fuels or to taxation needs secondary legislation or a fiscal decision, and Ofgem changes to the cap methodology and supplier licences. Exchequer funding needs a Budget decision.
- Delivery partners
- Ofgem; Energy suppliers (billing and Warm Home Discount payments); DWP (data matching for targeted support); Citizens Advice and fuel-poverty charities; HM Treasury (fiscal decision)
3.Who it is for, and what changes beyond today
- Target population
- Households in Great Britain, separated by heating type (electric, gas, off-gas other fuels) and income — with low-income gas households who cannot switch named as the group to protect.
- Eligibility
- Bill changes apply to every domestic customer of the fuel concerned; targeted support (design C and the compensation in design A) to low-income households identified through benefit and property data.
- Scale
- National by nature, because levies are recovered from every bill. No new delivery scale is chosen: the decision is about who pays a fixed set of costs.
- Baseline
- Since April 2026 the Exchequer has funded 75% of the domestic Renewables Obligation for 2026–27 to 2028–29 (£2.58bn in 2026–27) and the Energy Company Obligation is no longer funded through bills after March 2026 — about £150 off the average household’s bills, or £134 off the typical dual-fuel price cap (Budget 2025). Policy costs are now about a tenth of a typical electricity bill (£90 in April–June 2026, against £298 wholesale and £252 networks; UKERC). In Oct–Dec 2026 the cap’s unit rates are 26.32p per kWh for electricity and 7.97p for gas, a ratio of 3.3 to 1, and the typical dual-fuel cap is £1,723 a year (Ofgem). 9.4% of households in England were fuel poor in 2025. CPI inflation was 3.5% in September 2026, against the 2% target (ONS).
Source: HM Treasury, Budget 2025 (HC 1492) (Para 2.4, footnote 77; Table 4.1 line 1); UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (“Bills post-Budget” (p.15)); Ofgem, Energy price cap (default tariff) levels — Annex 9, levelised cap levels (Annex 9, unit rates and sheet 1c); Department for Energy Security and Net Zero, Annual Fuel Poverty Statistics in England, 2026 (2025 data) (Report p.1); Office for National Statistics, Consumer price inflation, UK: September 2026 (Series D7G7)
- Change beyond existing law or funding
- Budget 2025 already moved 75% of the domestic Renewables Obligation to taxation, but only to 2028–29, and stopped funding the Energy Company Obligation through bills after March 2026. The added decision is what happens to the costs still on electricity bills (the remaining quarter of the Renewables Obligation, Feed-in Tariffs, the Warm Home Discount and new nuclear funding) and after 2028–29, chosen from re-modelled designs with protection for those who cannot switch: (A) move remaining levies to gas bills with levy-funded support; (B) move them to general taxation; (C) leave them and expand targeted support (a larger Warm Home Discount plus a unit-rate discount).
4.How it would work
Do: Move the remaining policy costs off electricity unit prices (to gas bills or to taxation), or offset them for low-income households with targeted discounts Changing: a lower electricity-to-gas price ratio (designs A and B), or lower bills for eligible low-income households (design C)
Running cost of switching from a gas boiler to a heat pump
Modelled, not observedEffect record E-A17-HEATPUMP
Nesta modelled about £400 a year saved by a typical switcher, on April–June 2025 prices; not re-run after the April 2026 changes, so no size is shown. UKERC says a ratio of about 2 to 1 or below is broadly needed for heat pumps to compete with gas.
Bills of households that stay on gas
Modelled, not observedEffect record E-A17-GAS-HOUSEHOLDS
A harm under design A: about £76 a year more for gas households not eligible for support (about £20 for the 19 million or so such households if other levies also move to taxation, at about £1.1bn a year), while 3.6 million poorer gas households eligible for support saved about £83 (Nesta, April 2025 price cap). Design B shifts the cost to taxpayers instead; design C leaves gas bills unchanged but adds levy-funded support.
Fuel poverty among low-income households with electric heating
Hypothesis to test
Electrically heated households were twice as likely to be fuel poor (21%) as gas users (10%) in Nesta’s figures; a lower unit price should help them most, but no model on today’s tariffs exists.
General inflation
Hypothesis to test
Not a benefit of this brief. Moving costs to taxation lowers measured CPI once, for as long as it lasts (Budget 2025 forecast its measures would cut inflation by over 0.2 percentage points in 2026–27); moving them to gas largely reshuffles the energy index. Neither changes underlying inflation, which the Bank of England targets.
Outcomes are kept separate and never added into one impact figure.
5.Best evidence
How to make electricity cheaper (position paper) and Options for levy reform (technical report)
- Author or institution:
- Andrew Sissons, Marcus Shepheard, Martina Kavan, Elysia Lucas, Daniel Lewis (Nesta, a charity advocating heat electrification)
- Published:
- 5 June 2025
- Evaluation period:
- April–June 2025 Ofgem price cap
- Design:
- Distributional bill model using Ofgem price-cap methodology and consumer archetypes
- Sample or population:
- Great Britain households by heating type and eligibility for bill support
- Effect and uncertainty:
- Moving Renewables Obligation and Feed-in Tariff costs to gas: 4.5 million off-gas households save about £240 a year; 3.6 million poorer gas households save about £83 with support; gas households not eligible for support pay about £76 more (about £20 for some 19 million households in the compound proposal, which also moves other levies to taxation at about £1.1bn a year). Expanded Warm Home Discount (+840,000 households, core budget £514m to £640m) plus a 0.5p/kWh discount (£310m), levy-funded.
- Limits:
- Pre-dates Budget 2025: 75% of the Renewables Obligation it proposes to move is now on taxation to 2028–29, so the sizes are overtaken. Households only; own price and consumption assumptions.
Where: “The solution: rebalance levies and support households”; “The social tariff”; “Heat pumps become an even more affordable option”; technical report pp.4, 11, 13. Affiliation is provenance, not proof of quality.
- Author or institution:
- Kaylen Camacho McCluskey, Richard Carmichael, Aidan Rhodes, Rob Gross, Will Blyth (UK Energy Research Centre)
- Published:
- 28 July 2026
- Evaluation period:
- Ofgem cap data 2015–16 to April–June 2026
- Design:
- Analysis of price-cap bill components and review of reform options
- Sample or population:
- Typical dual-fuel direct-debit household, Great Britain
- Effect and uncertainty:
- Policy costs fell by £88 (51%) from the 2025–26 average to April–June 2026, to about a tenth of the electricity bill (£90); wholesale £298 (32%), networks £252. Moving the remaining policy costs to taxation could cut electricity bills by up to 10%.
- Limits:
- A briefing; bill components for a typical household, not by income or heating type; trajectories exposed to gas-price shocks.
Where: Section 3, “Bills post-Budget” (PDF p.15, printed p.11); Executive summary (PDF p.7); Box 3 (PDF p.19). Affiliation is provenance, not proof of quality.
Energy bills support: an update (HC 232, 2023-24)
- Author or institution:
- National Audit Office
- Published:
- 14 November 2024
- Evaluation period:
- 2022 to March 2024
- Design:
- Value-for-money audit of the energy bills support schemes
- Sample or population:
- All domestic and non-domestic support schemes in Great Britain and Northern Ireland
- Effect and uncertainty:
- Total estimated cost £44bn; the universal Energy Price Guarantee about £24.0bn. Protected most consumers from the extremes, but some support went to consumers who did not need it.
- Limits:
- Costs still being reconciled; the wider economic evaluation was not yet done.
Where: Conclusions; para 2.2 and Figure 3. Affiliation is provenance, not proof of quality.
6.Alternatives, counter-evidence and who loses
- Closest feasible alternative
- Keep current policy (75% of the Renewables Obligation on taxation to 2028–29, Warm Home Discount of £150 for about six million households) and put the money into retrofit, which lowers the energy homes need rather than its price (see the national decision brief on /energy).
- Strongest counter-evidence
- After Budget 2025 policy costs are only about a tenth of a typical electricity bill, while wholesale and network costs are about a third each, so further rebalancing has much less to move than Nesta modelled; and Nesta’s figures are now out of date.
Source: UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (“Bills post-Budget” (p.15)); Nesta, How to make electricity cheaper (position paper) and Options for levy reform (technical report) (Technical report (April 2025 cap basis))
- Distributional effects
- Design A: gains for electric-heated and heat-pump households, small rises for gas households, many of them tenants who cannot switch. Design B: costs fall on taxpayers by income, so it is more progressive than bills but competes with other spending. Design C: gains concentrated on eligible low-income households, with a levy on all other bill-payers. Lower-income households face higher inflation on essentials in energy shocks: at the October 2022 peak, 13.6% for the second-lowest income tenth against 11.6% for the second-highest (ONS Household Costs Indices).
- Main downside
- Raising gas prices hits households that cannot change their heating; funding from taxation costs billions a year (the current 75% share alone is about £2.1bn to £2.6bn a year) and stops after 2028–29 unless renewed.
| Option | Who is reached | Evidence | Likely outcome and timing | Cost and funding | Main trade-off |
|---|---|---|---|---|---|
| The proposalA: move remaining electricity levies to gas bills, with levy-funded protection | Electric-heated and heat-pump households gain; gas households pay a little more; low-income gas households protected if support is expanded | Modelled (Nesta 2025), now overtaken by Budget 2025; re-modelling needed | Lower price ratio from the first cap period after the change; uptake over years | A transfer among bill-payers; not costed on today’s baseline | Gas households who cannot switch, many of them tenants, pay more |
| The proposalB: move remaining electricity policy costs to general taxation (beyond 2028–29) | All electricity customers; the cost falls on taxpayers | UKERC: up to 10% off electricity bills; Budget 2025 forecast its partial version cuts CPI by over 0.2 points in 2026–27 | Lower bills and a one-off fall in measured inflation for as long as it is funded | Exchequer; the current 75% Renewables Obligation share alone costs £2.58bn in 2026–27; nothing allocated after 2028–29 | Billions a year competing with other spending; helps high users as much as the poor |
| The proposalC: leave levies, expand targeted help (bigger Warm Home Discount plus a unit-rate discount) | Eligible low-income households on any fuel | Nesta’s illustrative design; France’s income-tested voucher was designed to cover about 90% of the poorest tenth, but about a fifth of vouchers went unused | From the next winter’s scheme year | Levy on all bills; about £126m plus £310m a year on 2025 assumptions, not re-modelled | Does not change the price ratio, so heat pumps stay dear to run |
| Current policyCurrent policy: 75% of the Renewables Obligation on taxation to 2028–29, ECO no longer funded through bills, £150 Warm Home Discount | All households (about £150 off the average household’s bills); about six million get the £150 discount | Official costing (Budget 2025); UKERC bill analysis | In place now; the Renewables Obligation share returns to bills in 2029–30 unless renewed | £2.58bn (2026–27), £2.10bn, £2.20bn from the Exchequer | Time-limited; the price ratio stays at about 3 to 1 or more |
| AlternativeMonetary policy: Bank of England interest rates | The whole economy; borrowers pay more, savers gain | Bank explainer: higher rates cannot stop imported energy shocks, only limit knock-on effects, and take up to two years | Brings inflation back towards the 2% target, usually within two years; slows price rises rather than reversing them | No fiscal cost; costs fall on borrowers and output | Controls general inflation but does not protect any household from today’s higher price level |
| AlternativeUniversal bill relief, as in the 2022–23 Energy Price Guarantee | Every household, whatever its income | NAO audit: protected most consumers, but some support went to those who did not need it | Immediate, for as long as it is paid | About £24.0bn for the Energy Price Guarantee, within £44bn of support in 2022–24 (DESNZ estimate) | Very costly and poorly targeted; lowers measured inflation only while it lasts |
| AlternativeTargeted income support: an essentials test for Universal Credit rates | Households on Universal Credit who claim, whatever their heating fuel | Untested proposal; see the decision brief on /inequality | From the first uprating that moves awards; protects against the price level, does not lower inflation | Not costed; recurring Treasury cost; nothing allocated | Recurring cost; misses eligible people who do not claim |
| AlternativeRetrofit cold, inefficient homes first | Low-income households in the least efficient homes (England) | See the national decision brief on /energy: measured gas savings after wall insulation | Lower energy use after each home is treated; years to reach many homes | Warm Homes Plan grants allocated at programme level | Slow and needs the same installers as heat pumps |
The options compared, including current policy
The proposal
A: move remaining electricity levies to gas bills, with levy-funded protection
- Who is reached
- Electric-heated and heat-pump households gain; gas households pay a little more; low-income gas households protected if support is expanded
- Evidence
- Modelled (Nesta 2025), now overtaken by Budget 2025; re-modelling needed
- Likely outcome and timing
- Lower price ratio from the first cap period after the change; uptake over years
- Cost and funding
- A transfer among bill-payers; not costed on today’s baseline
- Main trade-off
- Gas households who cannot switch, many of them tenants, pay more
The proposal
B: move remaining electricity policy costs to general taxation (beyond 2028–29)
- Who is reached
- All electricity customers; the cost falls on taxpayers
- Evidence
- UKERC: up to 10% off electricity bills; Budget 2025 forecast its partial version cuts CPI by over 0.2 points in 2026–27
- Likely outcome and timing
- Lower bills and a one-off fall in measured inflation for as long as it is funded
- Cost and funding
- Exchequer; the current 75% Renewables Obligation share alone costs £2.58bn in 2026–27; nothing allocated after 2028–29
- Main trade-off
- Billions a year competing with other spending; helps high users as much as the poor
The proposal
C: leave levies, expand targeted help (bigger Warm Home Discount plus a unit-rate discount)
- Who is reached
- Eligible low-income households on any fuel
- Evidence
- Nesta’s illustrative design; France’s income-tested voucher was designed to cover about 90% of the poorest tenth, but about a fifth of vouchers went unused
- Likely outcome and timing
- From the next winter’s scheme year
- Cost and funding
- Levy on all bills; about £126m plus £310m a year on 2025 assumptions, not re-modelled
- Main trade-off
- Does not change the price ratio, so heat pumps stay dear to run
Current policy
Current policy: 75% of the Renewables Obligation on taxation to 2028–29, ECO no longer funded through bills, £150 Warm Home Discount
- Who is reached
- All households (about £150 off the average household’s bills); about six million get the £150 discount
- Evidence
- Official costing (Budget 2025); UKERC bill analysis
- Likely outcome and timing
- In place now; the Renewables Obligation share returns to bills in 2029–30 unless renewed
- Cost and funding
- £2.58bn (2026–27), £2.10bn, £2.20bn from the Exchequer
- Main trade-off
- Time-limited; the price ratio stays at about 3 to 1 or more
Alternative
Monetary policy: Bank of England interest rates
- Who is reached
- The whole economy; borrowers pay more, savers gain
- Evidence
- Bank explainer: higher rates cannot stop imported energy shocks, only limit knock-on effects, and take up to two years
- Likely outcome and timing
- Brings inflation back towards the 2% target, usually within two years; slows price rises rather than reversing them
- Cost and funding
- No fiscal cost; costs fall on borrowers and output
- Main trade-off
- Controls general inflation but does not protect any household from today’s higher price level
Alternative
Universal bill relief, as in the 2022–23 Energy Price Guarantee
- Who is reached
- Every household, whatever its income
- Evidence
- NAO audit: protected most consumers, but some support went to those who did not need it
- Likely outcome and timing
- Immediate, for as long as it is paid
- Cost and funding
- About £24.0bn for the Energy Price Guarantee, within £44bn of support in 2022–24 (DESNZ estimate)
- Main trade-off
- Very costly and poorly targeted; lowers measured inflation only while it lasts
Alternative
Targeted income support: an essentials test for Universal Credit rates
- Who is reached
- Households on Universal Credit who claim, whatever their heating fuel
- Evidence
- Untested proposal; see the decision brief on /inequality
- Likely outcome and timing
- From the first uprating that moves awards; protects against the price level, does not lower inflation
- Cost and funding
- Not costed; recurring Treasury cost; nothing allocated
- Main trade-off
- Recurring cost; misses eligible people who do not claim
Alternative
Retrofit cold, inefficient homes first
- Who is reached
- Low-income households in the least efficient homes (England)
- Evidence
- See the national decision brief on /energy: measured gas savings after wall insulation
- Likely outcome and timing
- Lower energy use after each home is treated; years to reach many homes
- Cost and funding
- Warm Homes Plan grants allocated at programme level
- Main trade-off
- Slow and needs the same installers as heat pumps
7.What other countries or the devolved nations show
Country lesson · France: pilot in Ardèche, Aveyron, Côtes-d’Armor and Pas-de-Calais, Pilot 2016–2017; national from 1 January 2018
An income-tested energy voucher in France that pays towards any heating fuel
Evidence: Observational analysisPartial match: some conditions differ
- What was changed
- The chèque énergie: a voucher sent automatically to households below an income ceiling (€7,700 a year per consumption unit), worth more for poorer and larger households (average €150), usable for electricity, gas, heating oil, wood or efficiency work. It replaced electricity and gas social tariffs, which only helped households on those fuels.
- Study design and population
- Government evaluation of the pilot reported to Parliament: administrative take-up and targeting data with beneficiary and business surveys. No comparison group; no measure of hardship. About 170,000 low-income households a year in four départements.
- Measured outcome there
- 77.9% of 2016 vouchers were used by September 2017 (about 22% non-take-up); more households were helped than under the social tariffs (134,997 against 131,190); the eligibility rule covered about 90% of the poorest tenth against 74% under the social tariffs; projected administration cost 1.5% of the budget against 3.9% for the social tariffs.
- Cost status
- Historic: a €600m aid envelope projected for national roll-out, plus administration (about €8.9m a year projected). Not a price for a UK scheme.
- What failed or remains uncertain
- About one voucher in five went unused — some never arrived, were lost or not understood; the evaluation did not test whether the voucher reduced cold homes, arrears or hardship; a flat voucher does not change the price ratio between electricity and gas.
- Why the UK differs
- The UK’s Warm Home Discount is a bill rebate through suppliers using benefit and property data; French eligibility uses household tax returns, which the UK has no single equivalent of; heating fuels and tariffs differ.
- First change required here
- Before choosing between a rebate, a unit-rate discount and levy changes, test whether existing data can identify low-income households by heating type (including off-gas homes) and measure non-receipt as well as take-up.
Not a UK forecast: the effect above was measured in that place and population. Source: Ministère de la Transition écologique et solidaire (France), Évaluation de l’expérimentation du chèque énergie (rapport au Parlement, NOR TRER1729569X) (Parts I–V). Reviewed 2026-10-04.
Country lesson · Seven low-income communities, New Zealand, Winters of 2001 and 2002
Insulating cold, damp homes in New Zealand
Evidence: Experimental or quasi-experimental evaluationPartial match: some conditions differ
- What was changed
- A free, standard retrofit package to government specification — ceiling insulation, draught stopping round windows and doors, insulating paper under floors and a polythene moisture barrier on the ground — installed by trained community teams.
- Study design and population
- Community-based cluster randomised study, single-blinded (inspectors and interviewers did not know which homes were insulated). 1,350 uninsulated households (4,407 people) where at least one member had respiratory symptoms; two thirds in the three most deprived tenths of areas.
- Measured outcome there
- Warmer, drier homes (bedrooms +0.5°C; humidity −2.3%) while using 81% of the energy of uninsulated homes. Odds of fair or poor self-rated health halved (OR 0.50, 0.38 to 0.68); fewer children off school (0.49) and adults off work (0.62); fewer GP visits (0.73).
- Cost status
- Historic only: about £700 a house excluding taxes at 2001 prices — not a guide to current English costs.
- What failed or remains uncertain
- Respiratory hospital admissions fell but not significantly (OR 0.53, 0.22 to 1.29); most outcomes were self-reported by occupants who knew their homes were insulated; temperature gains were small and partly taken as lower energy use.
- Why the UK differs
- English stock is largely brick and solid-wall, much already has loft insulation, and the climate is colder; English schemes treat whole homes under PAS 2035 at much higher cost. The trial chose households with respiratory illness, so health gains for a general fuel-poor population are less certain.
- First change required here
- Select homes by health need as well as income and energy rating — for example through GP or respiratory-service referral — and measure warmth, energy use, bills and health separately against a comparison group.
Not a UK forecast: the effect above was measured in that place and population. Source: BMJ, Effect of insulating existing houses on health inequality: cluster randomised study in the community (Abstract; Methods; Discussion). Reviewed 2026-10-04.
8.What delivery needs first
- data — Linked data on heating type, consumption and income (and off-gas homes) to model winners and losers, and to target support without relying only on benefit receipt. (Scarce resource shared with other priorities; owner: DESNZ with DWP and Ofgem)
- law — Secondary legislation to change how levy schemes are recovered, or a Budget decision to fund them from taxation after 2028–29. (Genuine veto: nothing proceeds without it; owner: DESNZ; HM Treasury; Parliament)
- procurement — Ofgem changes to the price-cap methodology and supplier licence conditions; supplier billing changes. (Requirement; owner: Ofgem; energy suppliers)
- staff — Heat-pump installers, so households can respond to cheaper electricity — the same workforce the retrofit programme needs. (Scarce resource shared with other priorities; owner: DESNZ (skills); MCS-certified installers)
- public consent — Gas households accepting higher bills (design A), or taxpayers funding levies (design B). (Requirement; owner: DESNZ and HM Treasury)
9.What it would cost
How the cost is built up: Design A: remaining electricity levies moved to gas + levy-funded targeted support (a transfer among bill-payers). Design B: remaining electricity levies × years funded from taxation (an Exchequer cost). Design C: expanded Warm Home Discount + unit-rate discount, recovered from all bills. Plus modelling and administration. The designs are alternatives; their costs are never added together.
| Component | Unit and quantity | Unit cost or amount | Type, price year, period | Status |
|---|---|---|---|---|
| Further levy rebalancing from electricity to gas or taxationGreat Britain household bills | per year; quantity to be set from need and capacity | Not yet costed (ledger C-A17-TRANSFER) | recurring; price year not stated; Each year after the change | Not yet establishedA transfer between bill-payers or to taxpayers, not a saving. For scale only: the Exchequer cost of funding 75% of the domestic Renewables Obligation is £2,580m in 2026–27 (Budget 2025); the remaining quarter is not separately costed. Source: UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (p.15) |
| Protection for households who cannot switch from gasLow-income gas-heated households | per year; quantity to be set from need and capacity | Not yet costed (ledger C-A17-PROTECTION) | recurring; price year not stated; Each year after the change | Not yet establishedNesta’s illustrative design (about £126m more for the Warm Home Discount core budget and £310m for a unit-rate discount, 2025 assumptions) is not re-modelled, so not shown as a cost. Source: Nesta, How to make electricity cheaper (position paper) and Options for levy reform (technical report) (“The social tariff”) |
| Distributional re-modelling and consultation on the post-April 2026 baselineThree designs, by heating type and income decile, with compensation options | per modelling exercise; quantity to be set from need and capacity | Not yet established | one-off revenue; price year not stated; Before the 2028–29 decision | Not yet established |
Further levy rebalancing from electricity to gas or taxation
Great Britain household bills
Not yet costed (ledger C-A17-TRANSFER)
recurring; price year not stated; Each year after the change; Not yet established
A transfer between bill-payers or to taxpayers, not a saving. For scale only: the Exchequer cost of funding 75% of the domestic Renewables Obligation is £2,580m in 2026–27 (Budget 2025); the remaining quarter is not separately costed.
Source: UK Energy Research Centre, The Cost of Electricity in the UK: Drivers, Challenges and Opportunities for Reform (UKERC Briefing Paper) (p.15)
Protection for households who cannot switch from gas
Low-income gas-heated households
Not yet costed (ledger C-A17-PROTECTION)
recurring; price year not stated; Each year after the change; Not yet established
Nesta’s illustrative design (about £126m more for the Warm Home Discount core budget and £310m for a unit-rate discount, 2025 assumptions) is not re-modelled, so not shown as a cost.
Source: Nesta, How to make electricity cheaper (position paper) and Options for levy reform (technical report) (“The social tariff”)
Distributional re-modelling and consultation on the post-April 2026 baseline
Three designs, by heating type and income decile, with compensation options
Not yet established per modelling exercise
one-off revenue; price year not stated; Before the 2028–29 decision; Not yet established
10.Who pays, and what is missing
- Programme envelope (a possible route, not an award)
- None identified
- Allocation committed to this change
- None
- Remaining gap
- Not costed on the current baseline; from 2029–30 the 75% Renewables Obligation share returns to bills unless a new decision is made.
- Proposed financing
- Designs A and C are financed by bill-payers through levies (a transfer, not new money); design B needs a Treasury decision on tax, spending or borrowing. The current Exchequer funding of 75% of the Renewables Obligation stops after 2028–29. Nothing is allocated to any design.
- Responsible payer
- bill-payers, central government
- Budget displaced
- Design B: other spending or tax cuts, at a scale of billions a year. Designs A and C: household budgets of the bill-payers who pay more.
11.First milestone and time to a useful result
DESNZ and Ofgem publish distributional modelling of the three designs on post-April 2026 tariffs, by heating type and income decile. (Owner: DESNZ with Ofgem. Proposed by UK Facts, not an official deadline.)
Time to first useful result: Modelling within months; bill effects from the first price-cap period after any change; heat-pump uptake over several years.
What could delay it: Data linking heating type and income are available to DESNZ The Treasury decides the post-2028–29 Renewables Obligation arrangement in time for Ofgem to change the cap Wholesale gas prices do not swing so far that the baseline must be re-run Installer capacity grows enough for households to respond
12.How we would know
- Baseline
- Electricity-to-gas unit price ratio in the cap; annual bills at matched consumption by heating type and income decile; fuel poverty by main heating fuel; heat-pump installations.
- Comparison
- The current-policy path (including the return of the 75% share to bills in 2029–30, unless changed), modelled on the same tariffs; observed outcomes before and after each cap period that implements the change.
- Leading indicator
- The unit price ratio and heat-pump installations each quarter; Warm Home Discount receipt among eligible low-income gas households.
- Follow-up
- Annual fuel poverty statistics by heating fuel; bills by income decile; heat-pump uptake over three to five years.
- Continue if
- Electric heating becomes cheaper to run relative to gas and heat-pump uptake rises, without fuel poverty rising among low-income gas households.
- Adapt if
- Low-income gas households’ bills or fuel poverty rise: widen or deepen the targeted support before the next stage.
- Stop if
- The design raises fuel poverty overall, or cannot be targeted to protect households who cannot switch.
- Thresholds
- Not yet set: Numerical levels need the re-modelled baseline and a published impact assessment; none exists on today’s tariffs.
What is not yet known, and how to find out
- What does each design cost, and who gains and loses, on today’s tariffs? (cost)Next step: Re-run the distributional model for designs A, B and C on the latest cap, net of the Budget 2025 changes.Scope: All Great Britain households, by heating type and income decile, each year to 2030–31 · Data or quotes needed: Current levy costs by scheme; cap unit rates; consumption by heating type and income; Warm Home Discount eligibility data · Who can estimate it: DESNZ analysts with Ofgem; HM Treasury for the Exchequer cost of design B
- How much would a lower price ratio raise heat-pump uptake in practice? (effect)Next step: Evaluate uptake against the price ratio using the changes already made in April 2026 before modelling further shifts.Defensible route: evaluation of existing delivery
- Can low-income households be identified by heating type, including off-gas homes, without relying only on benefits? (data)Next step: Test data matching between DWP, property and supplier records for the Warm Home Discount.
- Which instruments are needed to move each levy, and can they be in force before 2029–30? (legal)Next step: DESNZ legal review of the Renewables Obligation, Feed-in Tariff and Warm Home Discount legislation.
Sources last checked 4 October 2026 · Owner: Evidence editor (James Harris) · Next check: ONS consumer price inflation, UK: September 2026 (21 October 2026) or the first trigger: Ofgem price cap announcement for the next cap period.